preemptive right investment & finance definition

A right given to shareholders to retain the same percentage of ownership they currently have if new shares are issued. Preemptive rights prevent the current owners’ stake and control from being diluted. Preemptive rights usually are transmitted by giving existing shareholders a subscription warrant that spells out how many new shares they are entitled to buy. Preemptive rights often exist only if they are listed in the corporation’s charter.