Role of Intermediation when Equity is placed with Select Investors

57 Pages Posted: 28 May 2021 Last revised: 30 May 2021

See all articles by Siyuan Fan

Siyuan Fan

University of Wisconsin - Milwaukee

Ioannis V. Floros

University of Wisconsin - Milwaukee - Department of Finance

Ajai K. Singh

Department of Finance, University of Central Florida

Date Written: May 28, 2021

Abstract

We analyze the role of placement agents in non-underwritten equity deals placed with a limited investor base. We posit that stronger, better firms can place their unregistered shares directly with investors; whereas issuers’ reliance on agents to place relatively more liquid pre-registered shares is an indication of weakness. Indeed, direct placements of unregistered shares evoke a significantly positive response, while intermediated, best-effort deals of pre-registered shares are met with a significantly negative response. Drawing upon these insights, we create a new reputation measure for placement agents which, unlike traditional reputation measures, is consistently and positively associated with deal-announcement wealth effects.

Keywords: Financial Intermediaries; Placement Agents; PIPEs; Non-underwritten deals; Unregistered and Pre-Registered shares

JEL Classification: G24, G23, G32, G38, G18

Suggested Citation

Fan, Siyuan and Floros, Ioannis V. and Singh, Ajai K., Role of Intermediation when Equity is placed with Select Investors (May 28, 2021). Available at SSRN: https://ssrn.com/abstract=3854288 or http://dx.doi.org/10.2139/ssrn.3854288

Siyuan Fan

University of Wisconsin - Milwaukee ( email )

3202 N Maryland Ave
Milwaukee, WI 53211
United States

Ioannis V. Floros

University of Wisconsin - Milwaukee - Department of Finance ( email )

Milwaukee, WI 53201-0742
United States

Ajai K. Singh (Contact Author)

Department of Finance, University of Central Florida ( email )

College of Business Administration
12744 Pegasus Drive
Orlando, FL 32816
United States
407-823-0761 (Phone)
407-823-6676 (Fax)

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