Tag / anti-dilution

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AlphaTakes – Anti-Dilution Provisions

In this AlphaTakes video, Matt Storms discusses anti-dilution provisions in investor transactions involving an emerging company.  He outlines the different types of anti-dilution protection provisions that are typically negotiated and how they commonly impact the company.

Here are the key takeaways from this video:

    (1) Anti-dilution provisions contain rights in which the company provides some level of downward price adjustment to the holders of the rights in the event that the company sells securities at a lower price

    (2) The two most common types of anti-dilution provisions are full ratchet and weighted average, with weighted average being used in the overwhelming majority of circumstances

    (3) The exceptions or carveouts to the anti-dilution adjustments can be important in negotiating anti-dilution provisions

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AlphaTakes – Series A Preferred Stock Term Sheet (part two)

In this second of a two part AlphaTakes video series, Matt Storms discusses the second half of the Series A Preferred Stock term sheet for an emerging technology company, using the Series A term sheet published by the National Venture Capital Association.

Here are the key takeaways from this video:

  1. The three most common alternatives to anti-dilution provisions:
    • Weighted average
    • Full ratchet
    • No anti-dilution provisions
  2. Several provisions are not typically heavily negotiated in Series A financings:
    • Pay to play requirements
    • Attorneys’ Fees
    • Registration rights
    • Participation rights
    • Drag-along rights
    • No shop requirements
  3. Keep an eye on the big picture