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The issuance of new stock in which existing stockholders are given preference in purchasing new shares up to the proportion of shares they already own. Thus, an owner of 5% of all the issuing firm's outstanding stock would be permitted to buy up to 5% of the new issue at a special price below the current market price. Compare preemptive right. See also rights offering.
Privileged Subscription
A new issue of stock in which current shareholders are permitted to buy an amount equal to their percentage of ownership in the company at a price below the new issue's value. For example, a shareholder who owns 1% of the company is eligible to buy 1% of the new issue at a special price available only to current shareholders. Privileged subscriptions exist so current shareholders do not find their holdings suddenly diluted without their consent. See also: Anti-dilution provision.


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