Dilution is a Drag… The Impact of Financings in Emerging Markets

Frontier Market Equity Investing: Finding the Winners of the Future

“…Another factor is that as the economy's growth attracts attention, local companies are able to execute financings that would have been impossible in the past. This situation leads to dilution of shareholder returns, indicating that a tactic of "flipping" new issues to get in-line for the next issue in the pipeline might be very rewarding in some markets, as suggested in Speidell, Stein, Owsley, and Kreuter (2005). Overall, I believe that declining economies are likely to disappoint investors, whereas growing economies will prove rewarding only if the market prices are not "irrationally exuberant."…”