![]() ![]() Back to: Business Transactions Negative Connotation This is known as harsh provision added only when one participant is having a strong bargaining power. This idea reduces the big investors fear that small investors will let them continue providing the required equity and get benefits, especially in problematic economic situations for the corporation. In extreme situations, investors not taking part in it have to convert to ordinary stock, so they lose the protections of the preferred stock. If they do not buy prorated stock in these offerings, they lose the provisional benefits. It demands stockholders to take part in stock offerings to get benefit from specific anti-dilution protections. In corporate or startup finance, Pay to Play is commonly added as a provision of preferred stock. Back To: BUSINESS LAW How are Pay to Play Provisions Used? This is common in investing, where an individual must put in funds to be part of a future equity round. In the corporate world, individuals wishing to be part of a transaction must often put in money. Pay to play simply means requiring money to be a part of some activity. Update Table of Contents What is a Pay to Play Provision? How are Pay to Play Provisions Used? Academic Research on Pay to Play What is a Pay to Play Provision?
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