Why do companies include warrants in seasoned equity offerings?
AbstractWe analyze the reasons why companies issue units when they raise additional capital. We find that, in contrast to previous evidence, units are not offered to mitigate the agency conflicts or to signal security mispricing as they are predominantly issued during cold periods, in public rather than in rights offerings, and when the issue is underwritten. In addition, the results indicate that companies choose to offer units to increase their offer price flexibility and to underprice their seasoned equity offering so as to minimize the issue cost and the risk of failure of the issue. These results provide support for the net proceeds maximization hypothesis.
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Bibliographic InfoPaper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/966.
Date of creation: Mar 2007
Date of revision:
Publication status: Published in Journal of corporate finance, 2007, Vol. 13, no. 1. pp. 25-42.Length: 17 pages
Equity issue; Flotation method; Unit offerings; Warrants;
Other versions of this item:
- Gajewski, Jean-Francois & Ginglinger, Edith & Lasfer, Meziane, 2007. "Why do companies include warrants in seasoned equity offerings?," Journal of Corporate Finance, Elsevier, vol. 13(1), pages 25-42, March.
- G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
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