The standstill of global economic activity and consequent market downturn caused by the Covid-19 outbreak has delivered a double whammy of capital scarcity and significant valuation correction across several asset classes. Many Indian companies will be in the race to restructure business and/or raise capital, unfortunately, at reduced enterprise valuations.
For businesses with existing venture capital and private equity investors, the looming slew of ‘down rounds’ will trigger anti-dilution rights attaching to convertible securities held by their existing shareholders.
Anti-dilution adjustments are self-executing rights that offer protection from value erosion in the form of reduction of conversion price of securities, translating into a proportional increase in the number of equity shares issuable to the investor on conversion.
Continue Reading Down Rounds are Coming: Enforcement of Anti-Dilution Adjustments