The Calculation of Returns during Seasoned Equity Offers

Abstract

The paper analyses how the returns to a shareholder and the returns for an event study are calculated during the three types of seasoned equity offer in use in the UK, namely rights issues, open offers and placings. The calculations differ across the two types of return and the three types of offer. Evidence from a sample of SEOs shows the large impact that the choice of calculation method has on returns. An unresolved question is whether to use discount-adjusted returns in event studies of placings.Journal of Economic Literature classification: G24; G14

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

“…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.…”

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

“…1 See, among others, Smith (1986), Eckbo and Masulis (1995), and Corwin (2003) for the US, Gajewski and Ginglinger (2002) and Jeanneret (2005) for France, Bolognesi and Gallo (2013) for Italy, Slovin et al (2000), Iqbal (2008) and Armitage (2012) for the United Kingdom, and Armitage (1998) for both US and UK.…”