Why Do Companies Include Warrants in Seos: The Case of French Unit Offerings

40 Pages Posted: 24 Nov 2003 Last revised: 17 Jun 2015

See all articles by Jean-Francois Gajewski

Jean-Francois Gajewski

University Savoie Mont-Blanc, IREGE

Meziane Lasfer

Cass Business School, City, University of London

Edith Ginglinger

Université Paris-Dauphine, PSL Research University

Date Written: January 1, 2006

Abstract

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

Gajewski, Jean-Francois and Lasfer, Meziane and Ginglinger, Edith, Why Do Companies Include Warrants in Seos: The Case of French Unit Offerings (January 1, 2006). Journal of Corporate Finance, Vol. 13, No. 25-42, 2007. Available at SSRN: https://ssrn.com/abstract=461960 or http://dx.doi.org/10.2139/ssrn.461960

Jean-Francois Gajewski (Contact Author)

University Savoie Mont-Blanc, IREGE ( email )

4 Chemin de Bellevue
BP 80439
Annecy-le-Vieux, 74944
France
33 6 10 32 71 06 (Phone)
33 4 50 09 24 39 (Fax)

HOME PAGE: http://www.univ-savoie.fr/

Meziane Lasfer

Cass Business School, City, University of London ( email )

106 Bunhill Row
London, EC1Y 8TZ
Great Britain
+44 20 7040 8634 (Phone)
+44 20 7040 8881 (Fax)

HOME PAGE: http://www.cass.city.ac.uk/faculty/m.a.lasfer/

Edith Ginglinger

Université Paris-Dauphine, PSL Research University ( email )

Place du Maréchal de Tassigny
Paris, Cedex 16 75775
France

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