Information Content of Offer Date Revelations: A Fresh Look at Seasoned Equity Offerings

Abstract

Besides the offer price discount, investment bankers use revisions in offer size from the amount originally filed to signal the issuer's quality to their buy‐side clients. Unlike the offer price discount, offer size revision not only relates to the offer date price reaction, it also predicts post‐SEO (seasoned equity offering) performance. Improved SEOs, whose offer size exceeds the amount originally registered, experience significantly positive returns during the registration period and on the offer date. More importantly, they do not underperform post‐issuance. Their complement, regular SEOs, exhibit significantly negative returns during the registration period, on the offer date, and underperform their benchmark following issuance.

Does Annual Report Readability Influence the Design of Seos?

“…Enhanced readability enables investment banks to efficiently process the information contained in the annual report. Investors, who are clients of the investment banks, incorporate the bank's aggregated insights into their own assessments of the issuer, shaping their decisions to participate in the SEO process (Chan et al, 2018). The marketing efforts of investment banks facilitate the sharing of information about issuers with investors, and the credibility of this shared information plays a pivotal role in the SEO process.…”

Tough times for seasoned equity offerings: performance during the COVID pandemic

“…Former studies have tried to capture and explain the announcement effect in general (Masulis and Korwar 1986 ; Mikkelson and Partch 1986 ; Myers and Majluf 1984 ). Recent studies have focused on more specific questions like on offer date revisions, customer supplier relationships, or weekday of the announcement (Chan et al 2018 ; Johnson et al 2018 ; Michaely et al 2016 ). This paper examines the relevance of individual stock run-ups (Masulis and Korwar 1986 ), firm valuation (Jung et al 1996 ), firm size (Guo and Mech 2000 ), profitability (Mueller 1972 ; Myers and Majluf 1984 ) and deal size (Intintoli and Kahle 2010 ).…”