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What is a pre-emptive right? Would this right be valuable to existing shareholders if the existing...

What is a pre-emptive right? Would this right be valuable to existing shareholders if the existing share price is low?

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Pre-emptive rights empowers the exisiting shareholders to subcribe for the additional shares in the company prior to they made available for the general public. Since the cost of allocating the shares to existing shareholders is easy, less time consuming and cost effective, generally the price offered to existing shareholders are lesser as compared to what offered to the general public.

The pre-emptive rights protects investors againsts the risk of dilution of his shares and also offers discount over the price available to general public hence this right will still be valuable even if the existing share price is low.

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