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