Full Ratchet

A specialized service offered in certain exclusive establishments in The Red District in Amsterdam.

Also, a way of protecting against stock dilution.

If you own stock in a company, you don’t want that company issuing more stock. The more shares available, the less each share is worth...simple supply and demand.

The issuing of additional shares causes dilution in the pre-existing shares. A full ratchet provision represents a way to protect against dilution. It doesn’t apply to previous stockholders, though. It applies to people holding options to buy stock.

You hold an option to buy 1,000 shares of a company at $20 each. The full ratchet provision means that if the company sells stock at some point in the future at a lower price, you would get the right to buy at the lower price.

So, if the company tries to run a stock offering at $18 a share, you could exercise your option to purchase 1,000 shares at $18. Even though your option explicitly states $20, the full ratchet lets you buy shares at the lower price.

See: Venture Capital. See: Angel Round. See: A-Round.