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 ?
Antidilution provisions protect PIPE investors against future financing at lower valuations than those of the current offerings.
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.
One hopeful development is that some courts are reading something like a "confusion" requirement back into antidilution provisions.
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.
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 $.
The note and the warrants are subject to full ratchet antidilution provisions.
32 per share, subject to certain antidilution provisions.
In accordance with the antidilution provisions of the Company's 2004 Long-Term Incentive Plan, the Company's Board of Directors has exercised its discretion to adjust the number of shares available for award under the Plan and the number of shares subject to, and the exercise price of, each outstanding employee stock option to reflect the payment of the dividend.