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Lecture

Anti-dilution Protections

Description

This lecture covers anti-dilution protections in startup investments, including full-ratchet and weighted-average mechanisms. It explains down rounds, conversion price adjustments, and the effectiveness of anti-dilution provisions. Examples illustrate the impact on ownership percentages and valuations.

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Ontological neighbourhood

Business

Finance: Corporate finance

Related concepts (31)

Real versus nominal value (economics)

In economics, nominal (or, in effect, "named") value refers to value measured in terms of absolute money amounts, whereas real value is considered and measured against the actual goods or services for which it can be exchanged at a given time. For example, if one is offered a salary of

40,000, in that year, the real and nominal values are both

40,000. The following year, any inflation means that although the nominal value remains $40,000, because prices have risen, the salary will buy fewer goods and services, and thus its real value has decreased in accordance with inflation.

Inflation

In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduction in the purchasing power of money. The opposite of inflation is deflation, a decrease in the general price level of goods and services. The common measure of inflation is the inflation rate, the annualized percentage change in a general price index.

Preferred stock

Preferred stock (also called preferred shares, preference shares, or simply preferreds) is a component of share capital that may have any combination of features not possessed by common stock, including properties of both an equity and a debt instrument, and is generally considered a hybrid instrument. Preferred stocks are senior (i.e., higher ranking) to common stock but subordinate to bonds in terms of claim (or rights to their share of the assets of the company, given that such assets are payable to the returnee stock bond) and may have priority over common stock (ordinary shares) in the payment of dividends and upon liquidation.

Stock

Stock (also capital stock, or sometimes interchangeably, shares) consist of all the shares by which ownership of a corporation or company is divided. A single share of the stock means fractional ownership of the corporation in proportion to the total number of shares. This typically entitles the shareholder (stockholder) to that fraction of the company's earnings, proceeds from liquidation of assets (after discharge of all senior claims such as secured and unsecured debt), or voting power, often dividing these up in proportion to the amount of money each stockholder has invested.

Common stock

Common stock is a form of corporate equity ownership, a type of security. The terms voting share and ordinary share are also used frequently outside of the United States. They are known as equity shares or ordinary shares in the UK and other Commonwealth realms. This type of share gives the stockholder the right to share in the profits of the company, and to vote on matters of corporate policy and the composition of the members of the board of directors.

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