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 ?
The anti-dilution provision protects CRV from excessive dilution of their ownership if new preferred shares are issued in subsequent rounds of financing at a price less than the price that CRV paid for their preferred shares.
the standard anti-dilution provision for the sale of assets, see id.
Similarly, businesses should also carefully review any agreement by which stock is issued to ensure that it does not contain an anti-dilution provision. Like preemptive rights, such provisions typically provide a means for a shareholder to maintain his/her ownership percentage.
Anti-dilution Provision: The Series A Preferred shares will have anti-dilution protection on a full-ratchet basis to prevent dilution in the event the Company issues shares of any type at a purchase price less than the applicable conversion price for Series A Preferred shares in effect=The conversion price will also be subject to proportional adjustment for stock splits, stock dividends, recapitalizations, and the like.
Completion of the proposed transaction is subject to Trinity stockholder approval; Broadmark equity holder approval; obtaining an amendment to Trinity's outstanding public warrants to remove certain anti-dilution provisions relating to the payment of ordinary periodic cash dividends customary for a REIT; Broadmark Realty retaining at least USD 100m in cash following the consummation of the transactions, the redemption of Trinity shares, if any, and the payment of expenses and indebtedness required to be paid at the closing; and other customary closing conditions.
Completion of the proposed transaction is subject to Trinity stockholder approval; Broadmark equity holder approval; obtaining an amendment to Trinity's outstanding public warrants to remove certain anti-dilution provisions relating to the payment of ordinary periodic cash dividends customary for a REIT; Broadmark Realty retaining at least $100M in cash following the consummation of the transactions, the redemption of Trinity shares, if any, and the payment of expenses and indebtedness required to be paid at the closing and other customary closing conditions.
The 5% ownership retained by Aeos in Apalex will be subject to anti-dilution provisions, until such time that Firering has invested a total of USD1,000,000 into Apalex.
The remaining 5% is subject to anti-dilution provisions until Firefing has invested $1m with Altus having an option to co-found the project thereon.
Additional warrants were granted in accordance with anti-dilution provisions following capital raisings undertaken by the Company.
Some CITs have anti-dilution provisions that require plan sponsors to pay to move assets in or out of a plan when it reaches a certain size, the paper noted.
Examples of these types of formulas are anti-dilution provisions including a conversion price adjustment related to new stock issuances below the conversion price and return-of-capital distributions.
Each whole warrant allows the holder to acquire one common share at a price of USD2.35 for a period of five years from closing, and contains certain anti-dilution provisions.

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