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).