Anti-Dilution Protection

Anti-dilution protection (also know as an anti-dilution clause, subscription right, subscription privilege, or preemptive right) is used by investors to protect their investment in the event of a down round, or a significant dilution event, such as the issuance of new shares for a round of equity financing, or the conversion of a convertible note. It is triggered when the strike price for a round is less than the strike price from the prior round. The two commonly known types of anti-dilution protection include: “full ratchet” and “partial ratchet/weighted average.”