Anti-Dilution Provision

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 stock in a company. 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...like you would dilute your vodka tonic if someone came around and started adding more tonic), the clause lets you get more shares if you're an early investor. This way, your stake in the company remains the same, even with the new stock coming in...your portion of total shares remains the same.