The preemptive right gives current stockholders the right to purchase, on a pro rata basis, any new shares sold by the firm. This right protects current stockholders against both dilution of control and dilution of value.

Question

Quizplus · Accepted Answer

The statement is correct. The preemptive right allows current stockholders to maintain their proportional ownership in the company and prevent the dilution of their control or the value of their shares.

The Preemptive Right Gives Current Stockholders the Right to Purchase