Dilution Protection
Definition of 'Dilution Protection'A provision that seeks to protect existing shareholders or investors in a company from a decrease in their ownership position. The dilution protection feature kicks in if the actions of the company will decrease the stakeholders' percentage claim on assets of the company. Dilution protection provisions are generally found in venture capital funding agreements.Also known as anti-dilution protection. |
|
Investopedia explains 'Dilution Protection'The most common form of dilution protection protects convertible stock or other convertible securities in the company. In the event the company sells more shares at a lower price, the dilution protection provision will make a downward adjustment in the conversion price of the convertible securities, so that upon conversion existing investors receive more shares of the company, thereby retaining their ownership stake. Dilution protection provisions are classified in two categories - full ratchet anti-dilution and weighted average anti-dilution. |
Related Definitions
Articles Of Interest
-
The "True" Cost Of Stock Options
Perhaps the real cost of employee stock options is already accounted for in the expense of buyback programs. -
Convertible Bonds: Pros And Cons For Companies And Investors
Find out why businesses choose this type of financing and what effect this has on investors. -
Accretion / Dilution Analysis: A Merger Mystery
This analysis tool is an effective way to value mergers and acquisitions. The deal's on the table, but should you sign the papers? -
What is dilutive stock?
Dilutive stock is any security that dilutes the ownership percentage of current shareholders - that is, any security that does not have some sort of embedded anti-dilution provision. The reason ... -
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 convert a debt instrument into shares of the issuer's common stock, at ... -
7 Unconventional Ways Businesses Can Borrow Money
Find out how your business can get the money it needs - even when the bank says "no". -
Investment Choices For Wealthy People
Here is an overview of some investment vehicles that are available to wealthy investors. -
Small Business Financing: Debt Or Equity?
There are two sources of financing for small businesses: debt and equity financing. This article explains both. -
4 Big Businesses Built With Small Cash
Subway, Alienware, Ticketsnow and The Body Shop all got started with little start-up capital. -
4 Big Businesses Built With Small Cash
These four entrepreneurs built multi-million dollar companies with as little as $100. Find out who they are and how they did it.
Free Annual Reports