preemptive right

n.
The right of certain stockholders to maintain ownership of a constant percentage of a firm's stock. Such stockholders have the first opportunity to purchase new stock in the firm proportionate to the percentage of shares already held.

The right of a company's existing common shareholders to have the first chance to purchase shares in a company's future stock issue.

Investopedia Says:
Also known as "pre-emption rights".

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Right giving existing stockholders the opportunity to purchase shares of a New Issue before it is offered to others. Its purpose is to protect shareholders from dilution of value and control when new shares are issued. Although 48 U.S. States have preemptive right statutes, most states also either permit corporations to pay stockholders to waive their preemptive rights or state in their statutes that the preemptive right is valid only if set forth in the corporate charter. As a result, preemptive rights are the exception rather than the rule. Where they do exist, the usual procedure is for each existing stockholder to receive, prior to a new issue, a Subscription Warrant indicating how many new shares the holder is entitled to buy-normally, a proportion of the shares he or she already holds. Since the new shares would typically be priced below the market, a financial incentive exists to exercise the preemptive right. See also Subscription Right.

Right specified in the Charter of a corporation, granting to existing shareholders the first opportunity to buy a new issue of stock.

This entry contains information applicable to United States law only.

The privilege of a stockholder to maintain a proportionate share of the ownership of a corporation by purchasing a proportionate share of any new stock issues.

In most jurisdictions, an existing stockholder has the right to buy additional shares of a new issue to preserve equity before others have a right to purchase shares of the new issue.