Why Do Companies Include Warrants in Seos: The Case of French Unit Offerings
40 Pages Posted: 24 Nov 2003 Last revised: 17 Jun 2015
Date Written: January 1, 2006
We analyze the reasons why companies issue units when they raise additional capital. We find that, in contrast to previous evidence, units are not offered to mitigate the agency conflicts or to signal security mispricing as they are predominantly issued during cold periods, in public rather than in rights offerings, and when the issue is underwritten. In addition, the results indicate that companies choose to offer units to increase their offer price flexibility and to underprice their seasoned equity offering so as to minimize the issue cost and the risk of failure of the issue. These results provide support for the net proceeds maximization hypothesis.
Keywords: Equity issuance, Flotation method, Units offerings, Warrants
JEL Classification: G24, G32, G15
Suggested Citation: Suggested Citation