antidilution clause

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Antidilution Clause

1. In common and preferred stock, the right of a shareholder to maintain the same percentage of ownership in a company, should the company issue more stock. This protects the investor from devaluation of his/her shares if the company decides to hold a round of financing. In preferred stock, the anti-dilution clause also indicates the right of a shareholder to purchase more shares in a new round of financing at the offering price up to his/her previous percentage of ownership. Most U.S. states only recognize the anti-dilution clause if it is made explicit in the corporation's charter.

2. In convertible securities, the right of a holder to maintain the same conversion ratio in the event of a stock split. For example, if a convertible bond may be exchanged for 100 shares of common stock and there is a 2-for-1 stock split, the same convertible bond can be exchanged for 200 shares. This protects the investor from devaluation of the conversion option.

antidilution clause

A stipulation of virtually every convertible security that requires an adjustment to the conversion terms in the event of certain occurrences, such as stock splits, stock dividends, and new stock issues, that would dilute the value of the conversion privilege. As an example, a bond convertible into 40 shares of stock would have its terms changed to conversion into 120 shares if the stock split 3 for 1.
References in periodicals archive ?
00 warrants, to remove the price-based weighted average anti-dilution provisions from their outstanding warrants.
Our convertible preferred stockholders also recognized the restrictive impact of the anti-dilution provisions to our growth efforts.
It also carries discussion and examples of letters of intent for financing, due diligence requests, articles of incorporation for the venture-backed enterprise, anti-dilution provisions, the stock purchase agreement, investor rights agreements, co-sale agreements, warrants and other equity sweeteners, promissory notes, founders agreements, and closing opinion letters.
10 per share, subject to certain adjustments and anti-dilution provisions.
Companies should beware of anti-dilution provisions that provide for issuance of additional stock to existing shareholders at no cost.
Although most provisions of a typical term sheet are non-binding, founders should take the term sheet seriously because it serves as the blueprint for the entire deal, Founders should particularly focus on these provisions: (a) valuation of the investment (while founders and investors will rarely agree on valuation, there are creative methods in which to bridge this gap); (b) liquidation preferences and anti-dilution provisions which, if not properly addressed, could effectively leave the founders with very little equity; (c) investor voting rights; and (d) binding exclusivity provisions which, if not limited appropriately, could effectively hinder the company from obtaining capital from other sources.
Coverage includes: anti-dilution provisions (with an Anti-Dilution Glossary that simplifies even complex dilution calculations); working capital; liquidation preferences; debt financing formulas, ratios and metrics to monitor risk; earnouts; carried interest, with sample allocation, distribution and clawback provisions; and IP royalties.
40 per common share, subject to certain anti-dilution provisions.
60 per share pursuant to anti-dilution provisions in the warrants.
The purpose of the special meeting is to consider and vote for (1) a proposal to approve under applicable NASDAQ rules the conversion of the subordinated notes issued to such investors and the application of certain anti-dilution provisions in the warrants issued to such investors, and (2) a proposal to add 500,000 shares of common stock to the number of shares issuable under the company's 2005 Incentive Compensation Plan.
As such, I cancelled the anti-dilution provisions so that management and investors alike will be investing in Casablanca Mining on equal terms.
Additionally, on February 21, 2012, pursuant to the anti-dilution provisions contained in the purchase and sale agreement, Blue Dolphin issued 32,896 shares of Common Stock to LEH.