down round investment

down round investment
USA
A venture capital or other minority investment in which a new investor values the company at a lower valuation than investors in previous investment rounds. A down round investment results in:
• A new investor paying a lower price per share than previous investors.
• The issuance of a greater number of shares to the new investor than would have been issued at the previous, higher valuation of the company.
• Increased ownership dilution of existing stockholders who own common stock or do not otherwise have the benefit of anti-dilution provisions.
For more on minority investments and down round anti-dilution provisions, see Practice Note, Minority Investments: Overview (www.practicallaw.com/1-422-1158).
See also

Practical Law Dictionary. Glossary of UK, US and international legal terms. . 2010.

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