Anti-Dilution Protection
Definition
A provision in preference share terms that adjusts the conversion ratio of preference shares downward if the company subsequently raises capital at a lower price per share than the price paid by the preference shareholder. Anti-dilution protection transfers dilution from the protected investor to founders and common shareholders when a down round occurs. The two primary forms are broad-based weighted average anti-dilution and full ratchet anti-dilution.
Common Misapplication
The most common misapplication is failing to model the anti-dilution adjustment at the time the protection is agreed. A preference shareholder who holds anti-dilution protection in a round priced above the next round will have their conversion ratio adjusted in the next round. The dilutive effect on common holders must be modeled when the protection is agreed, not when it triggers.
FFI Standard Reference
This term is defined and applied in Book 3, Section 3.5: The Liquidation and Exit Mechanics Standard.
Related Terms
Citable URL
This term may be cited using the following permanent URL.
Full citation format: Founder Financial Infrastructure Standard, Beta v0.5, Glossary: Anti-Dilution Protection. https://ffistandard.org/glossary/anti-dilution-protection/. 2026.