medium · Private Equity & LBOs
In a growth equity investment, an investor utilizes a 'Weighted Average Anti-Dilution' provision.
If the company subsequently raises a 'down round,' how is the investor's conversion price adjusted?
- The price is adjusted based on the relative amount of new shares issued compared to the total shares outstanding
- The investor is issued enough new shares to preserve their exact original ownership percentage
- The conversion price is automatically reset to match the new, lower share price, regardless of round size
- The conversion price stays exactly the same, but the liquidation preference is doubled as compensation for the dilution
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