Preemption Rights
Preemption rights allow existing shareholders to maintain their ownership percentage by purchasing new shares before they are offered to the public. In the private markets, these rights are vital for protecting the interests of early investors, ensuring that their equity is not diluted in subsequent funding rounds. Preemption rights are a key consideration in shareholder agreements and investment negotiations.
Key Takeaways
- Allows shareholders to maintain ownership percentage.
- Prevents dilution in subsequent funding rounds.
- Important for protecting early investors.
- Key in shareholder agreements.
