Investopedia

Continue to Site »

Down Round

Filed Under » ,
Dictionary Says

Definition of 'Down Round'

A round of financing where investors purchase stock from a company at a lower valuation than the valuation placed upon the company by earlier investors.
Investopedia Says

Investopedia explains 'Down Round'

Down rounds cause dilution of ownership for existing investors. This often means the company's founders stock or options are worth much less, or even nothing at all. Unfortunately, sometimes the only other option is going out of business. In this case down rounds are necessary and welcomed.

Down rounds are commonplace when a red hot economy turns bad. A perfect example was the dot-com crash of 2000-2001.

Articles Of Interest

  1.

    Pin Down Stock Price With Real Options

    How can you assign a value to what a company may do with its business in the future? We explain how it works.

  2. Relative Valuation Of Stocks Can Be A Trap

    This method of valuing a company can make it look like a bargain when it is not.

  3. Connecting Crashes, Corrections And Capitulation

    Even though crashes, corrections and capitulations are bad news for investors holding the stock, there are still ways to profit.

  4. Understanding Investor Behavior

    Discover how some strange human tendencies can play out in the market, posing the question: are we really rational?

  5. Company Clone Cost Reveals True Value

    Find out how calculating a reproduction cost for a company can beat out the dividend discount model.

  6. Forces That Move Stock Prices

    You can't predict exactly how stocks will behave, but knowing what affects prices will put you ahead of the pack.

  7. Survival Tips For A Stormy Market

    Learn which stocks to watch and which to avoid when the Dow starts to sink.

  8. Making It Big On Wall Street

    Read about some of the most glamorous Wall Street jobs and what it takes to land one.

  9. Quants: The Rocket Scientists Of Wall Street

    Blend math, finance and computer skills to command a high - and well deserved - salary.

  10. Build A Baby Berkshire

    Get a piece of Warren Buffett's profit by using Form 13F to coattail his picks.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Disaster Loss

    A special type of tax-deductible loss, similar to a casualty loss, where a loss has been incurred by taxpayers who reside in an area that has been designated as a federal disaster area by the President.

  2. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.

  3. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.

  4. Cost-Push Inflation

    A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.

  5. Happiness Economics

    The formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth.

  6. Affluenza

    A social condition arising from the desire to be more wealthy, successful or to "keep up with the Joneses." Affluenza is symptomatic of a culture that holds up financial success as one of the highest achievements.
Trading Center