Anti-Dilution Protection

Anti-dilution provisions provide series investors downside protection in the event a subsequent financing round is priced at less than the current round. In the absence of anti-dilution protections, series investors would be diluted in subsequent down rounds. Anti-dilution protections adjust the conversion feature of preferred stock in order to assure that any dilution that might occur is either borne entirely, or at least in part, by the common stockholders and not by the preferred stockholders. 

Like other aspects of preferred stock rights, anti-dilution protections are heavily negotiated and courts will not seek to rescue preferred stockholders from their own inartful drafting.