When a company issues new shares — to raise a later funding round, expand an option pool for key management, or execute an M&A transaction with a capital-raising component — minority shareholders face the risk of being diluted out of their proportional ownership and voting power unless they are invited to subscribe for new shares…
An investor without a properly structured Anti-Dilution provision can watch their ownership stake collapse after a single down-round, even when the company is still fundamentally on track for the long term. A well-engineered Anti-Dilution clause resets the conversion price to offset the lost value, but the degree of protection depends entirely on which mechanism was…