Full Ratchet


DEFINITION of 'Full Ratchet'

An anti-dilution provision that, for any shares of common stock sold by a company after the issuing of an option (or convertible security), applies the lowest sale price as being the adjusted option price or conversion ratio for existing shareholders.

BREAKING DOWN 'Full Ratchet'

Full-ratchet anti-dilution protection allows an investor to have his or her percentage ownership remain the same as the initial investment.

For example, an investor who paid $2 per share for a 10% stake would get more shares in order to maintain that stake if a subsequent round of financing were to come through at $1 per share. The early round investor would have the right to convert his shares at the $1 price, thereby doubling his number of shares.

  1. Diluted Earnings Per Share - Diluted ...

    Diluted Earnings Per Share (or Diluted EPS) is a performance ...
  2. Price Ratchet

    A trigger that increases or decreases a price of a share/asset ...
  3. Venture Capital

    Money provided by investors to startup firms and small businesses ...
  4. Dilution

    A reduction in the ownership percentage of a share of stock caused ...
  5. Anti-Dilution Provision

    A provision in an option or a convertible security. It protects ...
  6. Convertibles

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