The calculation of returns during seasoned equity offers

Armitage, Seth

doi:10.1080/1351847x.2011.601665

Cited by 8 publications

(1 citation statement)

References 29 publications

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“…The share price might be expected to fall because of the dilution effect of the discount. However, the average abnormal return is positive on announcement of open offers and placings (Armitage, , includes a summary of the evidence). If the share price does not fall, it might appear as though non‐subscribers do not lose because of the discount.…”

Section: Background and Previous Researchmentioning

confidence: 99%

Are the Discounts in Seasoned Equity Offers Due to Inelastic Demand?

Armitage¹,

Dionysiou²,

Gonzalez³

2014

Business Fin & Account

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This paper investigates the large and diverse discounts in UK open offers and placings. Large discounts are a substantial cost to shareholders who do not buy new shares. The existing literature mainly examines US firm-commitment offers and private placements. The institutional setting differs in the UK, in ways that make the theory of inelastic demand for shares more important as an explanation for discounts than in the US. The paper finds that inelastic demand, or illiquidity of the issuer's shares, and financial distress, are key determinants of the discount. We expect these results to apply to other stock markets

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Section: Background and Previous Researchmentioning

confidence: 99%

Are the Discounts in Seasoned Equity Offers Due to Inelastic Demand?

Armitage¹,

Dionysiou²,

Gonzalez³

2014

Business Fin & Account

Self Cite

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Gaming the FTSE 100 index

Danbolt

Hirst

Jones

2018

The British Accounting Review

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In the UK (unlike the US and many other countries), companies enter and exit the main stock market index (FTSE 100) according to a clear set of rules based on market capitalisation.This creates an opportunity to game the system to secure or retain FTSE membership by manipulating capitalisation. There is considerable evidence in extant studies that index membership is beneficial, both for shareholders and managers. Hence, companies may adopt financial strategies designed to acquire or retain membership. We investigate two types of gaming. We define strategic gaming as a situation in which companies, which may initially be a number of places away from the boundary, make abnormal share issues cumulatively over several quarters. We find strong supportive evidence for this. For tactical gaming, which would involve companies in the very closest proximity to the boundary, we do not. Our analysis shows that gaming is limited to companies outside the index trying to get in.Companies that are close to exit do not game to retain their index place. The high natural volatility of market capitalisation makes success of gaming uncertain. Our central estimate is that about 5% of entries to the index appear to be the result of gaming.

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First-move advantage in seasoned equity offerings: Evidence from European banks

Botta

2019

Global Finance Journal

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The financial crisis that started in 2008 has generated significant losses for European banks, forcing them to undertake a series of seasoned equity offerings (SEOs) to reinforce their balance sheets in order to comply with regulatory capital requirements. As a results, they have produced repeated SEO waves in a relatively short time frame, when capital supply was limited due to the economic and financial context. We investigate the conditions at which European banks have been able to raise new equity capital by means of rights issues during the global financial crisis, demonstrating the existence of a first-move advantage: within a SEO wave, banks that acted first were able to complete the capital increase at more favorable conditions than their peers that acted later. We also show that first-movers experienced higher valuation ratios at the final cumrights date compared to latecomers. As a result, first-movers obtained a double advantage: they could offer a lower discount on a price that embedded an higher valuation ratio.

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The calculation of returns during seasoned equity offers

Cited by 8 publications

References 29 publications

Are the Discounts in Seasoned Equity Offers Due to Inelastic Demand?

Are the Discounts in Seasoned Equity Offers Due to Inelastic Demand?

Gaming the FTSE 100 index

First-move advantage in seasoned equity offerings: Evidence from European banks

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