preemptive right

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Preemptive right

Common stockholders' right to anything of value distributed by thecompany.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
Articles 223/224 - Strategic Investor - The New Law allows companies to increase its capital and allot the newly issued shares to a Strategic Investor without applying the preemption rights of the existing shareholders to subscribe for the capital increase in question, provided that the Strategic Investor carries out similar or complementary activities to the company.
While Hutchings's lawyers were arguing his case in the Northern California District Court, a Mariposa state senator introduced a bill in the California Assembly granting preemption rights to Hutchings and Lamon.
In the document, he warned of a conspiracy to deprive settlers of preemption rights in all beautiful lands.
Rather, he wished to protect preemption rights purchased by Virginians after the Revolutionary War in which he had a personal interest and that were not directly at issue in the case.
(41) While the case was initiated in the late eighteenth century, when Marshall wrote his decision in 1823 he changed the time flame involved to the postrevolutionary period in order to encompass the preemption rights that interested him personally.
The likelihood of having a successful claim made on the above argument is relatively remote unless someone can establish undisputable evidence that the underlying rational of the resolution of the extraordinary general assembly is to deprive the existing shareholders from their preemption rights. In practice, this is less likely to happen.
As clearly indicated in the above Article, existing shareholders of public joint stock companies have a preemption right to subscribe in shares that will be issued as a result of a capital increase.
M2 EQUITYBITES-September 12, 2016-Total E&P USA exercises preemption rights on Barnett Shale assets
Subject to approval of the Government of Senegal and co-venturer preemption rights, the sale transaction is anticipated to close by year-end 2016.