Information Content of Offer Date Revelations: A Fresh Look at Seasoned Equity Offerings

Abstract

Besides the offer price discount, investment bankers use revisions in offer size from the amount originally filed to signal the issuer's quality to their buy-side clients. Unlike the offer price discount, offer size revision not only relates to the offer date price reaction, it also predicts post-SEO (seasoned equity offering) performance. Improved SEOs, whose offer size exceeds the amount originally registered, experience significantly positive returns during the registration period and on the offer date. More importantly, they do not underperform post-issuance. Their complement, regular SEOs, exhibit significantly negative returns during the registration period, on the offer date, and underperform their benchmark following issuance.