Why Down-Round Financing? Down-round financing occurs when stock of a company is sold at a lower price per share than it was sold during a previous financing. Although having to choose to do a down-round may not be an ideal outcome for a company, it is a tool that comes in handy when a company is seeking new investors in times of necessity, economic uncertainty or in a chilled fundraising environment. The legal aspects of a down-round can be challenging tactically and strategically for founders and investors. Structuring a Down-Round Regardless of a company’s reason for opting to sell stock at a lower price than in its previous financing rounds, once such a decision has been made, there are various…

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