The authors investigate the potential for manipulation due to the interaction between secondary market trading prior to a seasoned equity offering and the pricing of the offering. Informed traders acting strategically may attempt to manipulate offering prices by selling shares prior to the seasoned equity offering, and profit subsequently from lower prices in the offering. The model predicts increased selling prior to a seasoned equity offering, leading to increases in the marketmaker's inventory and temporary price decreases. Further, sinc e manipulation conceals information, the ratio of temporary to permane nt components of the price movements is predicted to increase. Copyright 1993 by American Finance Association.
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Article provided by American Finance Association in its journal Journal of Finance.
Volume (Year): 48 (1993) Issue (Month): 1 (March) Pages: 213-45 Download reference. The following formats are available: HTML,
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