Preemptive rights allow common stockholders to maintain their proportionate ownership in the corporation when when the firm sells new shares of stock.

Question

Quizplus · Accepted Answer

Preemptive rights grant existing common stockholders the right to purchase new shares of stock before they are made available to the general public in order to maintain their proportionate ownership in the corporation. This ensures that existing shareholders have the opportunity to maintain their level of ownership and control in the company.

Preemptive Rights Allow Common Stockholders to Maintain Their Proportionate Ownership