Anti-dilution is a contractual protection in venture investment agreements that adjusts a preferred investor's conversion price downward if the company subsequently raises capital at a lower per-share price (a down round). This preserves — or even increases — the investor's ownership percentage relative to what they would have held after the down round.
Two main types
Full ratchet: The conversion price is reset to the down-round price in full — the most aggressive form, heavily favours the investor at the expense of founders and ordinary holders.
Weighted-average: The conversion price adjusts proportionally to the new shares issued and their price — a more balanced protection widely used in practice.
Why it matters for unlisted shares
Anti-dilution protections sit in CCPS or convertible instrument terms. If a company you hold ordinary shares in does a down round, anti-dilution provisions for preferred investors mean they effectively receive more ordinary shares upon conversion — diluting you further beyond the down round itself.
In a severe down round, full-ratchet anti-dilution can leave ordinary-share holders with a fraction of what they expected.
Example: A Series A investor held CCPS with weighted-average anti-dilution. After a down round halved the valuation, their conversion ratio adjusted to give them 15% more shares on conversion — further diluting ordinary holders.