Anti-Dilution Protection
Private Equity glossary · Private Equity Fundamentals
Definition
A provision protecting preferred-stock holders from dilution if the company subsequently issues shares at a lower price.
Anti-Dilution Protection in plain English
When you own shares, you own a slice of a company — but if the company later prints and sells new shares, your slice gets thinner. That thinning is called dilution. Anti-dilution protection is a safety clause for favored investors (holders of 'preferred stock,' a VIP class of shares) that kicks in if the company later sells shares CHEAPER than what these investors paid. It effectively adjusts their ownership so they aren't punished for having paid a higher price earlier — like being promised that if the store drops the price after you buy, you get credited the difference so you're not the sucker who overpaid.
Learn these first
Practice Anti-Dilution Protection
What is the new effective conversion price for the growth equity investor?
Related Private Equity terms
Private Equity practice questions · Private Equity flashcards · Private Equity study guide