Question

The preemptive right gives current stockholders the right to purchase, on a pro rata basis, any new shares issued by the firm. This right helps protect current stockholders against both dilution of control and dilution of value.a.Trueb.False

Answer 1

Answer:

True

Explanation:

Stockholders' preemptive rights are set by a contract clause that establishes that in case the corporation issues new stock, then a current shareholder must be given the right to buy additional shares before the stocks are sold to other investors.

The preemptive right usually gives the stockholder the right to buy new stock in the same proportion as his/her current stock ownership. For example, if an investor currently owns 2% of the company's stock, he/she will be able to buy 2% of every new set of stocks issued.