Anti-dilution protection
In accounting, anti-dilution protection means a charter provision that lowers preferred stock's conversion price when the company later sells stock below it. Broad-based weighted average moves it part way, by CP2 = CP1 × (A + B) ÷ (A + C); full ratchet moves it all the way down to the new price.
Also called Broad-based weighted average, Full ratchet.
Authority: NVCA model certificate of incorporation §4.4.4 (opens in a new tab). Sources
The lesson that teaches this
From the free founder back-office course, taught on one company's books, with exercises to work it yourself.
What it is not called
Each of these means something else. Use one here and an accountant reading the product notices.
- pro rata right (buying more)
- dilution itself
Nearby in the catalog
No component names this concept outright. These sit in the same part of the system.
13Metrics & analysis
Family specAlso in Equity & financing
Defined in Lexicon. This page is generated from that document, so the two can't disagree.