What Is Anti-Dilution Protection?
Anti-dilution protection is a clause that protects investors from losing ownership value if a company raises a future round at a lower valuation.
Anti-Dilution Protection Meaning
The anti-dilution protection, meaning, centres on preserving investor value during down rounds. To define anti-dilution protection in practice, it adjusts the conversion price or share ratio for earlier investors when new shares are issued at a lower price. A clear anti-dilution protection definition includes two common methods: full ratchet, which fully resets the price, and weighted average, which applies a partial adjustment. Anti-dilution protection stands for downside risk management, ensuring early investors are not disproportionately diluted when valuations fall.
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