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http://ssrn.com/abstract=1139887
 
 

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The Choice of Equity Selling Mechanisms: PIPES versus SEOS


Hsuan‐Chi Chen


University of New Mexico - Anderson School of Management

Na Dai


State University of New York at Albany - School of Business & Center for Institutional Investment Management

John Schatzberg


University of New Mexico - Robert O. Anderson Schools of Management

August 11, 2009

Journal of Corporate Finance, Forthcoming

Abstract:     
We examine the firm's choice between an SEO and a PIPE, an innovation in follow-on equity selling mechanism seen in the late 1990s. Our primary finding indicates that the rapid rise of the PIPE market fills the capital needs of firms which may not have access to more traditional alternatives. This lack of access is driven mainly by information asymmetry and weak operating performance. We also show that firms are more likely to choose PIPEs when the general market and the firm's stock are performing poorly. Furthermore, we find that selected firms with access to the public market may prefer a PIPE due to specific cost considerations.

Number of Pages in PDF File: 48

Keywords: Private investment in public equity (PIPE), seasoned equity offering (SEO)

JEL Classification: G10, G32

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Date posted: June 3, 2008 ; Last revised: November 8, 2009

Suggested Citation

Chen, Hsuan‐Chi and Dai, Na and Schatzberg, John, The Choice of Equity Selling Mechanisms: PIPES versus SEOS (August 11, 2009). Journal of Corporate Finance, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1139887

Contact Information

Hsuan-Chi Chen
University of New Mexico - Anderson School of Management ( email )
1924 Las Lomas NE
Albuquerque, NM 87131
United States
HOME PAGE: http://www.mgt.unm.edu/faculty/directoryArea.asp#FIN
Na Dai (Contact Author)
State University of New York at Albany - School of Business & Center for Institutional Investment Management ( email )
1400 Washington Ave.
Albany, NY 12222
United States
John Schatzberg
University of New Mexico - Robert O. Anderson Schools of Management ( email )
Albuquerque, NM 87131
United States
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