Anti-dilution
Private Credit glossary · Portfolio Management, Monitoring & Workouts
Definition
Contractual protection adjusting an investor's conversion ratio when new shares are issued at a lower price.
Anti-dilution in plain English
Anti-dilution is a safety clause that protects an early investor from getting quietly shrunk when a company later sells new shares more cheaply than the investor paid. Owning shares is like owning slices of a pizza; every time the company prints new slices, your slice becomes a smaller fraction of the whole — that shrinking is 'dilution.' If those new slices are sold at a lower price than you paid, it stings extra, so anti-dilution adjusts the terms in your favor (usually by giving you more shares, or a better conversion rate) to make up for the drop. In short, it's a written promise: 'if the company later sells cheaper than I bought, bump up my ownership so I'm not the one who loses.'
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