Stock Performance following Seasoned Stock-Warrant Unit Offerings

Abstract

Theories suggest that stock-warrant units are used as mechanisms for reducing agency costs or signaling as a form of sequential equity financing. While there is evidence of less severe price reaction to unit offering announcements, unit offering firms underperform not only nonissuing matching firms but also similar share offering firms. The same results are found when the long-run performance is measured relative to broad market indexes or measured by the three-factor or four-factor model. These findings are not consistent with the theories suggested for the roles of unit financing.