Why is the preemptive right important to shareholders?

Question

Quizplus · Accepted Answer

The preemptive right ensures that current shareholders have the right to purchase additional shares of stock before they are offered to the public, which protects their ownership interests and prevents dilution of their investment. This is important for shareholders as they maintain their proportionate ownership and control of the company, and can prevent their stake in the company from being diluted by the issuance of new shares to other investors. Choice A is incorrect as it doesn't relate to the preemptive right. Choice B is incorrect as dividend per share isn't directly related to the preemptive right. Choice C is incorrect as not every company's article of incorporation includes the preemptive right.

Why Is the Preemptive Right Important to Shareholders