Seasoned Equity Selling Mechanisms

Abstract

We report two innovations in seasoned equity selling mechanisms, accelerated seasoned equity offerings (SEOs) and private investments in public equities (PIPEs), and their impacts on the costs of raising equity capital for U.S. corporations. Majority of more recent SEOs (2002–July 2005) are accelerated SEOs. They have larger issue size and lower direct cost in comparison to the period 1990–1994. PIPEs are complementary to SEOs by fulfilling the demand of smaller offerings. PIPEs are on average more costly than SEOs. The costs of raising equity capital are associated with issue size, stock price, the type of shares offered, and the exchange where the firm's stock is listed.

TOPICS: Private equity, equity portfolio management, statistical methods