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