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Management. We thank the participants at the University of Michigan brown bag workshop for helpful comments and suggestions. Any errors are our own. Do stock prices underreact to SEO announcements? Evidence from SEO Valuation This paper examines whether the market underreacts to the negative information implicit in SEO announcements. We find that it does but conditional on the valuation of SEO firms prior to the SEO issue date. SEO firms that are overvalued relative to their industry peers experience a smaller decline in market value on the SEO announcement day but experience a larger decline over the next five years. The results are robust to various ways of choosing industry peers and valuation multiples and various methodologies for computing risk-adjusted abnormal returns. Cross-sectional regressions indicate SEO P/V ratios (offer-price to value ratio based on relative valuation techniques) are significantly positively related to announcement day returns and significantly negatively related to long-run returns even after controlling for expected growth rates, accruals, and B/M ratios. Additional tests indicate overvalued SEOs earn lower returns around future quarterly earnings announcement dates and do not exhibit superior ex-pos