Understanding Anti-Dilution Clauses
Dilution occurs when a company issues new shares, reducing the ownership percentage of existing shareholders. This typically happens during fundraising rounds when new investors come on board, or through employee stock options, convertible securities, or mergers. Dilution can significantly impact an existing shareholder’s control over the company and its share of future profits. Imagine you own 10% of a company with 1,000 shares, meaning you hold 100 shares. If the…