SIE: Preemptive Rights

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 it is granted, this is called a stockholder’s preemptive right. In order to meet this obligation to existing shareholders, companies carry out a rights offering in which the current shareholders are offered enough new stock to keep their