Preemptive rights are important to shareholders because they provide protection against a dilution of value when new shares are issued.

Question

Quizplus · Accepted Answer

Preemptive rights enable shareholders to maintain their percentage ownership in a company by allowing them to purchase new shares before they are offered to the public. Without this protection, the introduction of new shares could dilute the value of existing shares, resulting in a reduction of the shareholder's ownership stake and potential income.

Preemptive Rights Are Important to Shareholders Because They Provide Protection