Meaning and transaction use
An SEC-filed proxy describes replacing full-ratchet protection with a weighted-average provision and sets out a conversion-price adjustment using pre-issue fully diluted shares, consideration and new shares. [S1]
An SEC-filed offering disclosure shows that some securities expressly have no anti-dilution rights, demonstrating that protection must be confirmed from the instrument. [S2]
Proposed control method: retain a security-by-security rights matrix and calculate each qualifying issuance from the governing formula.
Worked example
Illustrative broad-based weighted-average calculation only. Assume an old conversion price of 2.00, 10.0 million pre-issue fully diluted shares and 2.0 million new shares issued at 1.00 each.
Scroll the table horizontally to view all columns.
| Measure | Calculation | Result |
|---|---|---|
| Equivalent shares at old price | 2.0m consideration / 2.00 | 1.0m |
| Adjustment numerator | 10.0m + 1.0m | 11.0m |
| Adjustment denominator | 10.0m + 2.0m | 12.0m |
| Adjusted conversion price | 2.00 x 11.0 / 12.0 | 1.8333 |
The illustrative weighted-average provision reduces the conversion price from 2.00 to approximately 1.8333.
Proposed transaction review process
Map rights
Identify protected securities, formulas, triggers and exclusions.
Test the issuance
Confirm price, consideration, shares and exempt-issuance status.
Calculate adjustment
Apply the document formula and conversion mechanics.
Update records
Reconcile the cap table, notices, approvals and financial reporting.
Evidence checklist
Instrument
Certificate, note, warrant, amendments and side letters.
Capitalisation
Outstanding and fully diluted shares under the defined perimeter.
Issuance
Price, consideration, share count, date and investor documents.
Approvals
Board, shareholder, class consents and waiver records.
Decision framework
| Situation | Proposed action |
|---|---|
| The issuance is exempt | Document the applicable exclusion and approval. |
| Different series have different rights | Calculate each protected series separately. |
| A waiver is requested | Model ownership and obtain required consent. |
| The denominator is disputed | Reconcile the defined fully diluted capitalisation before closing. |
Common errors to check
- Assuming every preferred security is protected.
- Using full-ratchet math for a weighted-average provision.
- Ignoring exempt issuances and waivers.
- Updating ownership without adjusting the conversion terms.
Model the anti-dilution adjustment
Bring the financing documents, proposed issuance and cap table to an anti-dilution review. Reconcile the trigger, formula and ownership effect.
Discuss the transactionPrimary references and editorial scope
- SEC filing: Weighted-average anti-dilution formula
Example change from full-ratchet to weighted-average protection and the related conversion-price formula. Reference checked 17 September 2026. - SEC filing: SAFE terms and anti-dilution disclosure
Examples of SAFE instruments disclosed without anti-dilution rights and with stated caps and discounts. Reference checked 17 September 2026.
General transaction education using public United States filings. Figures are hypothetical. Governing security documents, applicable law, tax and accounting determine actual adjustments.
General business information. Obtain advice appropriate to the legal, tax, accounting and financing facts. No offer, lender commitment or transaction outcome is represented. All worked examples use expressly assumed figures. Editorial draft date: 17 September 2026.
