preemptive right

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Preemptive right

Common stockholders' right to anything of value distributed by thecompany.

Preemptive Right

In stock, the ability of a shareholder to maintain the same percentage of ownership in a company should the company issue more stock by subscribing to a proportional number of shares at or below the market price. This protects the investor from devaluation of his/her shares if the company decides to hold a round of financing. The purchase of this proportional number of shares usually takes place before the new issue is offered to the secondary market, and must be exercised before a certain date (known as the expiration date) if the shareholder is to maintain the same percentage of ownership. It is also called a subscription right. See also: Anti-dilution provision.

preemptive right

A stockholder's right to keep a constant percentage of a firm's outstanding stock by being given the first chance to purchase shares in a new stock issue in proportion to the percentage of outstanding shares already held. Not all firms provide the preemptive right, which is more important to stockholders owning a significant part of a company. Also called subscription privilege. Compare privileged subscription. See also special subscription account.
References in periodicals archive ?
50 per share and to over-subscribe for additional shares of common stock that are not subscribed for by other holders of rights through the exercise of their basic subscription privilege, subject to availability and proration.
Shareholders who fully exercise their basic subscription privilege will have over-subscription privileges assuming that all shareholders do not exercise their basic subscription rights.
Pursuant to an over-subscription privilege, each rights holder that exercises its basic subscription privilege in full could also subscribe for additional shares at the same subscription price per share, to the extent that other stockholders do not exercise their subscription rights in full.
05 per share and represent the number of shares that MacAndrews & Forbes would otherwise have been entitled to subscribe for in the rights offering pursuant to its basic subscription privilege (which is approximately 60% of the total shares offered in the rights offering and private placement combined).
In addition, the subscription rights include an over-subscription privilege pursuant to which each rights holder that exercises its basic subscription privilege in full (as described in the prospectus supplement being mailed on or about February 17, 2006 to stockholders of record as of the Record Date) may also subscribe for additional shares at the same subscription price of $2.