pre-emptive right

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Pre-emptive rightsByAyesha MajidDefinitionPre-emptive rights are a clause in an Derivative, security or merger agreement that gives the investor the right to maintain his or her percentage ownership of a company by buying a proportionate number of shares of any future issue of the security.Pre-emptive rights are sometimes called "subscription rights," "anti-dilution provisions," or "subscription privileges." Pre-emptive rights are particularly relevant for convertible preferred stock.Pre-emptive rights protect investors from the risk of new shares being issued at a lower price than the investors previously received. Why they are issued?They also are an incentive for companies to perform well so they can issue stock at higher valuations when need be.They can arise on the allotment, transfer or t