Securities Law Commons^™

Understanding Price-Based Antidilution Protection: Five Principles To Apply When Negotiating A Down-Round Financing, Robert P. Bartlett

Scholarly Works

As most venture capital investors are aware, the economic downturn of the past two years—and the concomitant decrease in private company valuations—has created an opportunity for significant returns on new venture investments seldom seen since the early 1990s. Yet while the investment opportunities of the current economic environment may have attractive financial valuations, they frequently come with the added cost of significant transactional complexity. In particular, the issuance of securities by a private company at a price that is below the price previously paid by the company's investors (typically referred to as a “down-round” financing) may trigger one or more …