SIE practice questionmediumPreemptive Rights
Why are preemptive rights valued by shareholders?
- AThey confer automatic board seats
- BThey guarantee higher dividend rates
- CThey prevent dilution of ownership when new shares are issued✓ Correct answer
- DThey allow conversion to preferred stock
Explanation
Why C — They prevent dilution of ownership when new shares are issued
Preemptive rights protect shareholders from dilution during new issuances. They do not assure higher dividends, board positions, or conversion.
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