The right to buy new shares of stock in proportion to stock already owned is called a

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The right to buy new shares of stock in proportion to stock already owned is called a preemptive right. This right allows existing shareholders to maintain their percentage ownership in the company and prevents dilution of their ownership. A stock right is a type of derivative security that gives the holder the right to buy or sell a stock at a specific price within a certain timeframe. A stock option is similar to a stock right but is a contract between an investor and a company that gives the investor the right to buy or sell shares at a specific price within a certain timeframe. Section 1244 is a provision of the Internal Revenue Code that allows shareholders of small businesses to claim losses on their investments as ordinary losses instead of capital losses, which can result in a higher tax benefit.

The Right to Buy New Shares of Stock in Proportion