Subscription Right

What is Subscription Right?

A subscription right, also known as a preemptive right or a right of first refusal, is a right that gives the holder the option to purchase a specific asset or security, typically at a predetermined price, before it is offered to others. Subscription rights are often granted to existing shareholders as a way to give them the opportunity to maintain their ownership stake in a company.

For example, if a company is issuing new shares of stock, it may offer existing shareholders the opportunity to purchase a certain number of these new shares at a discounted price. This gives the existing shareholders the chance to maintain their ownership percentage in the company, rather than seeing it diluted by the new shares being issued.

Subscription rights can also be granted in other contexts, such as when a company is selling a specific asset or when a lender is offering a new loan. In these cases, the subscription right gives the holder the option to purchase the asset or take out the loan before it is offered to others.

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