The Rise of Accelerated Seasoned Equity Underwritings

46 Pages Posted: 18 Jan 2007

See all articles by Bernardo Bortolotti

Bernardo Bortolotti

Bocconi University; University of Turin

William L. Megginson

University of Oklahoma

Scott Smart

Indiana University - Kelley School of Business - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: January 11, 2007

Abstract

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.

Keywords: Equity offerings, underwriting, investment banking

JEL Classification: G15, G24

Suggested Citation

Bortolotti, Bernardo and Megginson, William L. and Smart, Scott B., The Rise of Accelerated Seasoned Equity Underwritings (January 11, 2007). FEEM Working Paper No. 5.2007; EFA 2007 Ljubljana Meetings Paper. Available at SSRN: https://ssrn.com/abstract=957389 or http://dx.doi.org/10.2139/ssrn.957389

Bernardo Bortolotti

Bocconi University ( email )

Via Sarfatti 25
Milan, MI 20136
Italy

University of Turin

Via Po 53
Torino, Turin - Piedmont 10100
Italy

William L. Megginson (Contact Author)

University of Oklahoma ( email )

307 W Brooks, 205A Adams Hall
Norman, OK 73019
United States
(405) 325-2058 (Phone)
(405) 325-1957 (Fax)

HOME PAGE: http://faculty-staff.ou.edu/M/William.L.Megginson-

Scott B. Smart

Indiana University - Kelley School of Business - Department of Finance ( email )

1309 E. 10th St.
Kelley School of Business
Bloomington, IN 47405
United States
812-855-3401 (Phone)
812-855-5875 (Fax)

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