Full Ratchet

An anti-dilution provision that resets an investor's conversion price to the lowest price of any later round, regardless of how many shares are issued.

Example

An investor who bought at 2.00 converts at 1.00 after a down round at 1.00, doubling their shares.

Important

It heavily dilutes founders and common holders in a down round and is less common than weighted average protection.

Related terms

• Weighted Average Anti-Dilution — An anti-dilution provision that lowers an investor's conversion price by an amount reflecting both the lower price and how many new shares were issued.
• Anti-Dilution Provision — A contractual term that adjusts an earlier investor's conversion price downward if a later round prices shares lower, protecting them from a down round's effect on their ownership.
• Down Round — A financing round priced at a lower valuation, or lower price per share, than the company's previous round.

Lessons that explain it

• Board seats, vetoes, drag-alongs and anti-dilution decide who holds power in a crisis — Control terms rarely matter when a company is thriving. They matter in down rounds, disputed sales and restructurings - exactly when founders and small investors most need to understand them. (12 min)

All 578 terms in the Investing glossary