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Price Pressure and Overnight Seasoned Equity Offerings

Published online by Cambridge University Press:  05 April 2018

Matthew T. Gustafson
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Abstract

Between 2009 and 2014, 75% of seasoned equity offerings (SEOs) were announced and issued overnight, compared to 27% between 2000 and 2008. Overnight issuers obtain a higher SEO offer price because they experience more favorable pre-offer returns. Consistent with these favorable returns being due to the avoidance of pre-issue selling pressure, non-overnight issuers experience a 2.5% pre-issue stock-price decline that reverses within 7 days. This post-issue reversal is increasing in SEO offer size and bigger following large pre-issue price declines. In contrast, returns following overnight offerings are less positive and unrelated to SEO offer size or pre-issue returns.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 53 , Issue 2 , April 2018 , pp. 837 - 866
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2018 

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Footnotes

1

This article is a modified version of chapter 1 of my dissertation at the University of Rochester Simon Graduate School of Business. I am grateful to Cliff Smith for his guidance. I also thank Laura Field, Xiaohui Gao Bakshi (referee), Jarrad Harford (the editor), David Haushalter, Zhiguo He, Ivan Ivanov, Candace Jens, Michelle Lowry, Robert Novy-Marx, Jay Ritter (associate editor and referee), Bill Schwert, Justin Vitanza, Adam Welker, and Toni Whited. I thank Jonathan Clarke, Chitru Fernando, and Ayuko Yasuda for their discussions and seminar participants at the 2012 European Finance Association, the 2013 American Finance Association, Pennsylvania State University, the University of Georgia, Southern Methodist University, the University of Delaware, and Baruch College. This article has been previously circulated as “The Consequences of Accelerating Seasoned Equity Offerings” and “Issuance Costs in Today’s Equity Market: The Causal Effect of Accelerating Seasoned Equity.”

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