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The Rise of Accelerated Seasoned Equity Underwritings

Author

Listed:
  • William L. Megginson

    (The University of Oklahoma)

  • Bernardo Bortolotti

    (Università di Torino and Fondazione Eni Enrico Mattei)

  • Scott B. Smart

    (Indiana University)

Abstract

Seasoned equity offerings (SEOs) executed through accelerated underwritings have increased global market share recently, raising over $850 billion since 1998, and now account for over half (two-thirds) of the value of U.S. (European) SEOs. We examine 31,242 global SEOs, executed during 1991-2004, which raise over $2.9 trillion for firms and selling shareholders. Compared to fully marketed deals, accelerated offerings occur more rapidly, raise more money, and require fewer underwriters. Importantly, accelerated deals reduce total issuance cost by about 250 basis points. Accelerated deals sell equal fractions of primary and secondary shares, whereas in traditional SEOs primary shares dominate. Announcement period returns are comparable for traditional and accelerated offerings, while secondary and mixed offerings trigger more negative market responses than do primary offerings. We conclude that this rapid, worldwide shift towards accelerated underwriting creates a spot market for SEOs, and represents the long-predicted shift towards an auction model for seasoned equity sales.

Suggested Citation

  • William L. Megginson & Bernardo Bortolotti & Scott B. Smart, 2007. "The Rise of Accelerated Seasoned Equity Underwritings," Working Papers 2007.5, Fondazione Eni Enrico Mattei.
  • Handle: RePEc:fem:femwpa:2007.5
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    References listed on IDEAS

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    1. repec:oup:rcorpf:v:5:y:2016:i:2:p:200-238. is not listed on IDEAS
    2. Autore, Don M., 2011. "Does Rule 10b-21 increase SEO discounting?," Journal of Financial Intermediation, Elsevier, vol. 20(2), pages 231-247, April.
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    6. Huang, Chia-Wei & Ho, Po-Hsin & Lin, Chih-Yung & Yen, Ju-Fang, 2014. "Firm age, idiosyncratic risk, and long-run SEO underperformance," International Review of Economics & Finance, Elsevier, vol. 34(C), pages 246-266.
    7. repec:eee:finana:v:56:y:2018:i:c:p:73-84 is not listed on IDEAS
    8. Loughran, Tim, 2007. "Geographic dissemination of information," Journal of Corporate Finance, Elsevier, vol. 13(5), pages 675-694, December.
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    More about this item

    Keywords

    Equity Offerings; Underwriting; Investment Banking;

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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