Article thumbnail

Why do Companies Include Warrants in Seasoned Equity Offerings: The case of French Unit Offerings.

By Meziane Lasfer, Edith Ginglinger and Jean-François Gajewski

Abstract

We analyse the reasons why companies issue units when they raise additional capital. In contrast to previous evidence, our results show that 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 contrast, the results indicate that companies choose to offer units to circumvent the offer price regulation and to underprice their seasoned equity offering so as to minimise the issue cost and the risk of failure of the issue. These results provide support for the net proceeds maximization hypothesis.Warrants; Equity Issue; Flotation Method; Unit Offerings;

OAI identifier:

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.

Suggested articles

Citations

  1. (1980). A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity,
  2. (1992). Adverse Selection and the Rights Offer Paradox,
  3. (2000). Alternative Flotation Methods, Adverse Selection and Ownership Structure: Evidence from Seasoned Equity Issuance in the UK,
  4. (1990). Equity Issues and Stock Price Dynamics,
  5. (1996). Equity Offerings Following the IPO: Theory and Evidence,
  6. (1978). Pricing of Warrants and the Value of the Firm,
  7. (1979). Risk Measurement when Shares are Subject to Infrequent Trading,
  8. (1986). Seasoned Equity Offerings: an Empirical Investigation,
  9. (1989). Signalling and the Pricing of New Issues,
  10. (1989). Signalling by Underpricing in
  11. (2004). Stock Performance following Seasoned Stock-warrant Unit Offerings,
  12. (2003). Stock vs. Stock-warrant Units: Evidence from Seasoned Offerings,
  13. (1986). The Agency Cost of Free Cash Flow, Corporate Finance, and Takeovers,
  14. (1991). The Effect of Information Releases on the Pricing and Timing of Equity Issues,
  15. (2001). The Optimal Spread and Offering Price for Underwritten Securities,
  16. (1993). The Pricing of Initial Public Offerings: a Dynamic Model with Information Production,
  17. (1990). The Structure and Governance of Venture-Capital Organizations,
  18. (2003). Underpricing and Discounting in Seasoned Equity Offers,
  19. (2003). Unit Initial Public Offerings: Staged Equity or Signalling Mechanisms?,
  20. (2001). Warrants in Initial Public Offerings: Empirical Evidence,
  21. (1997). Why include Warrants in New Equity Issues? A Theory of Unit IPOs,