preemptive right

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Word: Preemptive Right

Part of Speech: Noun

Definition: A preemptive right is a special privilege given to shareholders, which allows them the first chance to buy new shares of stock before the company offers them to anyone else. This right helps protect shareholders from losing some of their ownership in the company when more shares are issued.

Usage Instructions:

• When to use: You would use the term "preemptive right" when discussing company shares, stock ownership, or financial matters related to investments.
• Who it applies to: It specifically applies to shareholders of a company.

Example:

• "When the company announced it was issuing more shares, the shareholders were pleased to know they had preemptive rights, allowing them to buy additional stock and maintain their ownership percentage."

Advanced Usage:

In more advanced discussions, you might talk about how preemptive rights can affect a company’s capital structure or impact shareholder voting power.

Word Variants:

• Preemptive (adjective): Relating to the right itself. Example: "The preemptive offer allowed existing shareholders to invest more in the company."
• Preemption (noun): The act of exercising the preemptive right.

Different Meaning:

In a broader context, "preemptive" can refer to actions taken to prevent something from happening. For example, "preemptive measures" might refer to steps taken to avoid a problem before it occurs.

Synonyms:

• Subscription right
• First refusal right

Related Terms:

• Dilution: This refers to the reduction in ownership percentage that existing shareholders might face if they do not exercise their preemptive rights.
• Shareholder: A person or entity that owns shares in a company.

Idioms and Phrasal Verbs:

While there are no direct idioms or phrasal verbs associated specifically with "preemptive right," you might encounter phrases related to investing, such as: - "Buy low, sell high" (referring to a strategy in stock trading). - "Cash in" (to take advantage of an opportunity, often related to investments).

Academic

Noun

1. the right granting to shareholders the first opportunity to buy a new issue of stock; provides protection against dilution of the shareholder's ownership interest