Series 65: 2.1.1.7 Preemptive Rights

2.1.1.7  Preemptive Rights

If a corporation decides to issue additional common stock, current stockholders may have the right to maintain their share of ownership by purchasing a proportionate amount of the new issue before it is offered to the public. When granted, this is called a stockholder’s preemptive right. A preemptive right serves as anti-dilution protection for common stockholders, meaning it allows them to protect their ownership from dilution. In order to meet this obligation to existing shareholders, companies carry out a rights offering