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.

Example

A 2.00 conversion price adjusts to about 1.77 after a 3,000,000 raise at 1.00 on 10,000,000 existing shares.

Important

The broad-based version, which counts all fully diluted shares, gives a smaller adjustment than a narrow-based one or a full ratchet.

Related terms

• 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.
• 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.

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