Nutanix Granted ‘Ratchet’ to VC Investors

Investors have been watching tech IPOs with an eye on what kind of protections late-stage backers are getting. Both Box and Square, for example, revealed they granted “ratchets” promising more shares if the IPO price fell below a certain point.

Now, yet another highly valued tech company is going public with such protections. Nutanix, a solid-state storage company that filed Tuesday to go public, has granted its early 2014 investors a ratchet protection guaranteeing them a return on the IPO’s pricing, according to its S-1 filing.

If Nutanix’s IPO price ends up below $10.93—18% below the $13.40 fetched in its last private round, which valued the company at $2 billion—Series D investors would receive shares to make up the difference. The protection ensures that those investors, who bought in at $7.29 per share, will make a 33% return on any IPO pricing. Series D investors include Khosla Ventures, Lightspeed Venture Partners and Riverwood Capital.

However, investors in Nutanix’s most recent Series E round such as Fidelity have far more limited protections. They would receive a small number of extra shares only if Series D investors receive more stock, through a weighted-average anti-dilution protection meant to make up for dilution rather than a drop in share price.