Stock Performance Following Seasoned Stock-Warrant Unit Offerings
Posted: 9 Nov 2003
Theories suggest that stock-warrant units are used as mechanisms for reducing agency costs or signaling firms' good future prospects as a form of sequential equity financing. While there is evidence of less severe price reaction to unit seasoned equity offering announcements than to share seasoned equity offering announcements, unit offering firms in general underperform not only non-issuing size, book-to-market and prior return matching firms but also similar share offering firms. The same results are found when the long-run performance is measured relative to broad market indices or measured by the three-factor or four-factor model. These findings are not consistent with the theories suggested for the roles of unit financing in reducing agency costs or signaling.
Keywords: Unit offering. Seasoned offering, Warrants, Staged Financing, Signaling, Agency costs
JEL Classification: G32
Suggested Citation: Suggested Citation