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I've heard about anti-dilution provisions. What are they?
Convertible securities, warrants and options convert into another "underlying" security at a fixed price. Anti-dilution provisions protect holders of convertibles against future issuances of underlying securities at a lower price. Weighted average anti-dilution reduces the conversion price and increases the number of shares issuable on conversion based on a formula that averages the original conversion price and the newer, lower issuance price. Full ratchet anti-dilution reduces the conversion price to equal the lower price; this method is favored by investors, because it lowers their conversion price even if a small number of new, cheaper securities is sold.
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