Anti-Dilution Provision

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."

BREAKING DOWN 'Anti-Dilution Provision'

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

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RELATED FAQS
  1. What type of companies use downround financing?

    Down round financing involves selling stock to new investors at a lower price than the investors paid. Shares for the company ... Read Full Answer >>
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    First, let's define convertible bonds. A unique combination of debt and equity, they provide investors with the chance to ... Read Full Answer >>
  3. 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 >>
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