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English: Full Ratchet Provision; Full-ratchet Anti-dilution Protection
Definition: If the company's stock price is lower than a subsequent issue before a conversion price of preferred shares issued, the previous round of preferred stock conversion price shall be adjusted to the issue price of the new round of stock.
Interpretation: entirely ratchet clause is an anti-dilution provisions, mainly aimed at the target company or the subsequent private placement financing, to avoid the risk of investors before the devaluation of the shares or shares to be overly diluted.
For example, if a company in the A round of financing to $ 1.00 per share issue price of $ 1,000,000 preference shares, the conversion ratio of its ordinary shares is 1: 1 (ie a conversion price of $ 1.00), together with a full ratchet clause . After that, the company again in the B round of financing in the price per share $ 0.50 $ issued 1,000,000 shares of preferred stock, common stock and its conversion ratio is also 1: 1 (ie a conversion price of $ 0.50). In full ratchet clause, then the conversion ratio A round of financing preference shares and ordinary shares will be adjusted to 1: 2 (ie conversion price was adjusted to $ 1.00 from $ 0.50), after adjustment to ensure the A round of financing preference shares B Price round equal.
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