Final answer:
The correct answer is option C. The preemptive right allows a stockholder to maintain their percentage of ownership in a public company. It prevents dilution of their stake when new shares are issued, ensuring that they can keep their proportional voting power intact.
Step-by-step explanation:
Regarding common stock, the preemptive right allows a stockholder to maintain their percentage of ownership when new shares are issued. The preemptive right ensures that existing shareholders have the opportunity to purchase additional shares before the public or outside investors can, thereby preventing dilution of their ownership stake.
This is crucial particularly in public companies where ownership is represented by shares of stock, and the number of shares owned dictates the voting power a shareholder has in company decisions, such as the election of the board of directors.
The more shares of stock a shareholder owns, the more influence they hold, as they have more votes to cast.
The preemptive right is a way for shareholders to protect their investment and influence within the company whenever new stock is issued. This aspect is fundamental in corporate structures where no single individual typically owns a majority, making each share and the rights attached to it, significant for the shareholder's power and investment security.