Question: It is frequently stated that the primary purpose of the preemptive right is to allow individuals to maintain their proportionate share of the ownership and control of a corporation.
Q1. How important do you suppose this consideration is for the average stockholder of a firm whose shares are traded on the New York or American Stock Exchanges?
Q2. Is the preemptive right likely to be of more importance to stockholders of publicly owned or closely held firms? Explain.
Q3. Is a firm likely to get a wider distribution of shares of it sells new stock through a preemptive rights offering to existing stockholders or directly to underwriters?
Q4. Why would management be interested in getting a wider distribution of its shares?