Question

Each share of common stock provides the investor with a ________ right that offers the investor the first right to purchase any new shares of common stock the firm decides to issue. this allows common stockholders to maintain a proportional share of ownership in the company.

Answer 1

Answer: Preemptive right

Step-by-step explanation:

Preemptive right is an alternative option or clause that bestows the right on investors to maintain their percentage of ownership in a company through the purchase of equivalent amount of shares. It is also called subscription right and is applicable for convertible preferred stock.

Preemptive right are of two kinds

• The weighted-average position

• The ratchet-based position.

The weighted-average position allows shareholders to buy shares at a price that will account for the differences between the previous and the new price, while the ratched-based position allows shares to be bought at new reduced price by existing shareholders.

Answer 2

Had to look for the options and the answer the best fits the blank provided is PREEMPTIVE. When we say preemptive right, this is the right granted to certain shareholders in order for them to buy additional shares in the company. Hope this answers your question.