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 ?
9) PIPE contracts use the lull ratchet antidilution provision, which gives existing investors the right to receive additional shares at the price of a new financing round at a lower valuation.
As for the federal antidilution cause of action, the Lanham Act's antidilution provision cannot be used against "[n]oncommercial use[s]," a category that may shelter parodies.
Nearly 10% of all deals in the third quarter of 2005 had no antidilution provision, compared to just 8% in the same period of 2004.
The suit also claims that Toys "R" Us engaged in unfair competition and violated the federal Copyright Act of 1976, the Trade Dress Infringement section of the Lanham Trademark Act, the Federal Antidilution Act and the antidilution provision of Illinois law.
Both the notes and the warrants contain customary antidilution provisions in the event of any stock split, reverse stock split, reclassification or recapitalization of the Company.
While stock option grants generally contain antidilution provisions that explain how the exercise price and number of shares will be adjusted if the employer declares a stock dividend or stock split, most plans do not contain provisions for similar adjustments if an equity restructuring occurs.
25 per share, subject to antidilution provisions if the company subsequently issues shares at a lower price.
4) (3) In accordance with the antidilution provisions of SFAS No.
3 million additional shares of ReNeuron, in both cases pursuant to the antidilution provisions of the license agreement entered into with ReNeuron in July 2005 and two ReNeuron financings.
The note and the warrants are subject to full ratchet antidilution provisions.
As a result of certain antidilution provisions contained in the debentures, following the closing of the private placement the debentures will be convertible into shares of common stock of the company at a conversion price of lesser of $.