overhang

Definition

Excess stock options or debt that will dilute existing shareholders, hanging over the cap table like a financial storm cloud. Future pain that everyone pretends isn't there.

Example Usage

We have serious overhang from convertible notes that will crush our valuation when they convert in the Series A.

Origin

Stock market terminology adopted by startup finance

Fun Fact

Large option pools and convertible notes create overhang that can make companies uninvestable despite good traction.

Source: Startup finance and cap table terminology

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