Market Reaction, Revised Proceeds, and the Classification of Seasoned Equity Offerings

Abstract:     
Registrations of SEOs serve to galvanize information gathering about issuers. We posit that market reaction to new information influences issuers’ decision about their final offer size. The offer size relative to the amount filed initially is a parsimonious measure which helps predict subsequent firm performance. Improved offerings, whose offer size exceeds the amount registered originally, record significantly positive price reaction on the offer date and do not underperform post-issuance. Conversely their complement, Regular offers, experience significantly negative reaction on the offer date and underperform their benchmark following issuance. Improved SEO firms make relatively higher investments and generate stronger institutional demand.

Number of Pages in PDF File: 57

Keywords: SEOs, Market Timing, Managerial Response, Market Reaction during Registration

JEL Classification: G14, G32, G39

working papers series