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Ratchet

An anti-dilution mechanism that protects a series of preferred stock by automatically adjusting the conversion price to a lower price in the event that the preferred series was issued at a higher amount (e.g., if the conversion price of Series A Preferred Stock is $1.00 – equal to the initial purchase price per share – and XYZ sells its Series B stock for $0.25 per share, then the Series A conversion price would be adjusted from $1.00 to $0.25).

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