Full Ratchet Anti-Dilution
Full Ratchet Anti-Dilution is a shareholder protection provision that prevents early shareholders who have the protection from being diluted by later down rounds. If the company has a down round, the price the original shareholder paid for its securities is reduced to match the price paid by the investors in the down round. Full ratchet is a great provision for a shareholder who gets the right, but full ratchet may end up causing more harm than good due to pushback from other shareholders who do not enjoy the right. It typically only is appropriate in a pay-to-play or distressed situation.
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