The Rise of Accelerated Seasoned Equity Underwritings
Università di Torino
William L. Megginson
University of Oklahoma
Indiana University Dept. of Finance
January 11, 2007
FEEM Working Paper No. 5.2007
EFA 2007 Ljubljana Meetings Paper
Seasoned equity offerings (SEOs) executed through accelerated underwritings have increased global market share recently, raising over $850 billion since 1998, and now account for over half (two-thirds) of the value of U.S. (European) SEOs. We examine 31,242 global SEOs, executed during 1991-2004, which raise over $2.9 trillion for firms and selling shareholders. Compared to fully marketed deals, accelerated offerings occur more rapidly, raise more money, and require fewer underwriters. Importantly, accelerated deals reduce total issuance cost by about 250 basis points. Accelerated deals sell equal fractions of primary and secondary shares, whereas in traditional SEOs primary shares dominate. Announcement period returns are comparable for traditional and accelerated offerings, while secondary and mixed offerings trigger more negative market responses than do primary offerings. We conclude that this rapid, worldwide shift towards accelerated underwriting creates a spot market for SEOs, and represents the long-predicted shift towards an auction model for seasoned equity sales.
Number of Pages in PDF File: 46
Keywords: Equity offerings, underwriting, investment banking
JEL Classification: G15, G24working papers series
Date posted: January 18, 2007
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