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Equity with Warrants in Private Placements

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  • Dalia Marciukaityte
  • Anita K. Pennathur
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    Abstract

    We examine private equity with warrant (unit) placements and compare them with private equity placements. Firms making unit placements are smaller, younger, riskier, and characterized by higher information asymmetry than equity-placing firms. Furthermore, unit-placing firms experience good pre-placement stock performance; however, their post-placement performance is poor and worse than that of equity-placing firms. We also find that very few of the placed warrants are in the money at expiration. Our results are consistent with the window of opportunity hypothesis and the theory that warrants are especially desirable to a clientele of overoptimistic investors. Copyright 2007, The Eastern Finance Association.

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    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1540-6288.2007.00165.x
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    Bibliographic Info

    Article provided by Eastern Finance Association in its journal Financial Review.

    Volume (Year): 42 (2007)
    Issue (Month): 1 (02)
    Pages: 143-160

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    Handle: RePEc:bla:finrev:v:42:y:2007:i:1:p:143-160

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    Web page: http://www.easternfinance.org/
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