Asked by Cameryn Stewart on May 05, 2024
Verified
The purpose of preemptive rights is to allow common stockholders to buy new shares at a lower price than currently offered on the open market.
Preemptive Rights
The right of existing shareholders to buy new shares before they are offered to the public, to maintain their proportionate ownership in the company.
Common Stockholders
These are investors who own shares of a company's common stock, granting them voting rights and a portion of the company's profits through dividends.
- Identify and explain the benefits and mechanisms of preemptive rights in stock ownership.
Verified Answer
SH
Sowmya h. k.May 07, 2024
Final Answer :
False
Explanation :
Preemptive rights allow existing shareholders to maintain their proportional ownership in a company when new shares are issued, by giving them the opportunity to buy additional shares before the public, but not necessarily at a lower price.
Learning Objectives
- Identify and explain the benefits and mechanisms of preemptive rights in stock ownership.