Glossary

A type of security that entitles the holder to buy a proportionate amount of common stock or preferred stock at a specified price for a period of years. Warrants are usually issued together with a loan, a bond or preferred stock --and act as sweeteners, to enhance the marketability of the accompanying securities. They are also known as stock-purchase warrants and subscription warrants.

A financing round whereby previous investors, the founders, and management suffer significant dilution. Usually as a result of a washout round, the new investor gains majority ownership and control of the company. Also known as burn-out or cram-down rounds.

a chart that shows in what order all private equity investors get paid.

this is a more moderate antidilution protection approach that uses a formula that takes into account not only the share price of the new issuance, but also the old stock price, number of shares issued, and number of shares overall. It’s more moderate than a full ratchet, which sets the new price without respect to any of these factors.

The investor's conversion price is reduced, and thus the number of common shares received on conversion increased, in the case of a down round; it takes into account both: (a) the reduced price and, (b) how many shares (or rights) are issued in the dilutive financing. See Broad-Based Ratchet and Narrow-Based Ratchet definitions.

Weighted average antidilution provisions, which are the milder form of antidilution protection, increase the conversion rate of the preferred stock based on a formula that is intended to take into account the overall economic effect of the sale of new stock by the company. The formula includes variables for the price at which new stock is sold, the price at which the old preferred stock was sold, the total number of new shares issued and the total number of shares outstanding.

An amendment of the Securities and Exchange Act of 1934 that regulates tender offers and other takeover related actions such as larger share purchases.

A negotiated agreement between the debtors and its creditors outside the bankruptcy process.

The act of changing the value of an asset to an expense or a loss. A write-off is used to reduce or eliminate the value an asset and reduce profits.

An upward or downward adjustment of the value of an asset for accounting and reporting purposes. These adjustments are estimates and tend to be subjective; although they are usually based on events affecting the investee company or its securities beneficially or detrimentally.