Anti-Dilution Provision

AAA

DEFINITION of 'Anti-Dilution Provision'

A provision in an option or a convertible security. It protects an investor from dilution resulting from later issues of stock at a lower price than the investor originally paid. Also known as an "anti-dilution clause."

INVESTOPEDIA EXPLAINS 'Anti-Dilution Provision'

These are common with convertible preferred stock, which is a favored form of venture capital investment.

RELATED TERMS
  1. If-Converted Method

    A method used to calculate the share impact of convertible securities ...
  2. Convertible Preferred Stock

    Preferred stock that includes an option for the holder to convert ...
  3. Venture Capital

    Money provided by investors to startup firms and small businesses ...
  4. Employee Stock Option - ESO

    A stock option granted to specified employees of a company. ESOs ...
  5. Convertibles

    Securities, usually bonds or preferred shares, that can be converted ...
  6. Full Ratchet

    An anti-dilution provision that, for any shares of common stock ...
RELATED FAQS
  1. Where does the stock come from when convertible bonds are converted to stock?

    First, let's define convertible bonds. A unique combination of debt and equity, they provide investors with the chance to ... Read Full Answer >>
  2. What is dilutive stock?

    Dilutive stock is any security that dilutes the ownership percentage of current shareholders - that is, any security that ... Read Full Answer >>
  3. If a long call is owned on the record date of a stock, is the owner of the option ...

    The owner of a long call for a stock is entitled to a dividend only if the option is exercised prior to the ex-dividend date, ... Read Full Answer >>
  4. How can an investor profit from the cyclical nature of the electronics sector?

    An investor can profit from the cyclical nature of the electronics sector in two ways. He can employ sector rotation, shifting ... Read Full Answer >>
  5. What does negative vega mean for credit spreads?

    Greek vega measures an option's sensitivity with respect to a change in the underlying asset's volatility. The vega of an ... Read Full Answer >>
  6. What options strategies are best suited for investing in the banking sector?

    The covered call option strategy allows investors to profit from the banking sector's stability and its track record for ... Read Full Answer >>
Related Articles
  1. Options & Futures

    A New Approach To Equity Compensation

    The new financial accounting standard known as FAS 123R could take a bite out of your portfolio. Find out why here.
  2. Forex Education

    The Dangers Of Share Dilution

    Investors need to be aware of the existence of dilutive securities and how they can affect existing shareholders.
  3. Investing Basics

    What are Ordinary Shares?

    Ordinary shares are any type of shares that are not preferred and don’t pay any type of predetermined dividend amount.
  4. Options & Futures

    How To Trade Orange Juice Options

    How do orange juice options work and which factors determine the orange juice valuations? Here's a sneak peak into the world of orange juice options.
  5. Fundamental Analysis

    Explaining the Geometric Mean

    The average of a set of products, the calculation of which is commonly used to determine the performance results of an investment or portfolio.
  6. Investing Basics

    What is Capital Stock?

    Capital stock refers to the number of authorized shares a corporation may issue, both common and preferred.
  7. Brokers

    Private Equity's Returns Are Tempered By Its Risks

    Private equity firms adopt approaches to quickly hike up earnings and boost returns, but these investments come with big risks too.
  8. Mutual Funds & ETFs

    Pros and Cons: Preferred Stock ETFs vs. Bond ETFs

    A look at the differences between preferred stock ETFs and bond ETFs and when you should invest in one over the other.
  9. Options & Futures

    Why Is Best Buy Stock So Volatile?

    We look at why BBY has been so volatile in the past and whether this trend is likely to continue or abate in the future.
  10. Entrepreneurship

    The Risk And Rewards Of Investing In Startups

    Investing in startups is a very risky business but can reward investors greatly if and when they do pay off.

You May Also Like

Hot Definitions
  1. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  2. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  3. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  4. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
  5. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
Trading Center