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Finance Glossary

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Anti-Dilution Covenants

Definition:

Dilution happens when a company issues a bunch of additional shares or options, which can lower the amount of ownership or the value of investments for current shareholders. (Not to be confused with delusion—similar, but not quite the same.)

An anti-dilution covenant sounds like something out of Indiana Jones, but it's really just the tiny fine print that helps protect you if you own shares. If you own convertible shares or preferred stock, you might see this little clause somewhere in the paperwork. If the company issues more shares (diluting your ownership), the clause lets you get more shares if you're an early investor.