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 ?
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.
Article 197 - Sale of Entitlements to Rights Issue - Shareholders have preemption rights to subscribe for their company's capital increase (Rights Issue).
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.
Those who had already secured preemption rights then sought to preserve their claims legally.
Italian oil group Eni (BIT:ENI) has recently terminated its agreement to buy Heritage's 50% stake in Ugandan Blocks 1 and 3A, after Tullow (LON:TLW) had exercised its preemption rights.
It is subject to the final execution of the sale and purchase agreements, to the relevant regulatory approvals and to partners' preemption rights only on the Iara transaction.
An Eni spokesman explained that Eni revoked the agreement signed on 18 December to buy Heritage's 50% stake in Ugandan Blocks1 ad 3A, on which UK oil and gas company Tullow (LON:TLW) has exercised preemption rights.
Eni terminated on Friday the agreement signed on 18 December to buy Heritage's 50% stake in Ugandan Blocks 1 ad 3A, on which UK oil and gas company Tullow (LON:TLW) had exercised preemption rights.
Subject to approval of the Government of Senegal and co-venturer preemption rights, the sale transaction is anticipated to close by year-end 2016.