Seasoned common stock issuance following an IPO

Myron B. Slovin; Marie Sushka; Yvette M. Bendeck

doi:10.1016/0378-4266(94)00087-5

Seasoned common stock issuance following an IPO

Myron B. Slovin, Marie Sushka, Yvette M. Bendeck

Finance

Research output: Contribution to journal › Article › peer-review

20 Scopus citations

Abstract

We examine valuation effects of a NASDAQ firm's first seasoned common stock issue after its initial public offering on NASDAQ and analyze how share-price response is affected by characteristics of the firm and its IPO. First seasoned issues have excess returns of -2.9%, occur after periods of sharply rising stock market prices, and have large positive cumulative excess returns prior to announcement. We find IPO underpricing mitigates share-price response to seasoned offerings as predicted by Welch's (1989) model of the IPO market. Returns are also inversely related to the proportion of firm shares sold by insiders as part of the seasoned offering.

Original language	English (US)
Pages (from-to)	207-226
Number of pages	20
Journal	Journal of Banking and Finance
Volume	18
Issue number	1
DOIs	https://doi.org/10.1016/0378-4266(94)00087-5
State	Published - Jan 1994

Keywords

IPO
Seasonal stock issuances
Underpricing

ASJC Scopus subject areas

Finance
Economics and Econometrics

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10.1016/0378-4266(94)00087-5

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AB - We examine valuation effects of a NASDAQ firm's first seasoned common stock issue after its initial public offering on NASDAQ and analyze how share-price response is affected by characteristics of the firm and its IPO. First seasoned issues have excess returns of -2.9%, occur after periods of sharply rising stock market prices, and have large positive cumulative excess returns prior to announcement. We find IPO underpricing mitigates share-price response to seasoned offerings as predicted by Welch's (1989) model of the IPO market. Returns are also inversely related to the proportion of firm shares sold by insiders as part of the seasoned offering.

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KW - Seasonal stock issuances

KW - Underpricing

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Seasoned common stock issuance following an IPO

Abstract

Keywords

ASJC Scopus subject areas

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