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Why do Companies Include Warrants in Seasoned Equity Offerings: The case of French Unit Offerings

Lasfer, Meziane; Ginglinger, Edith; Gajewski, Jean-François (2005-05), Why do Companies Include Warrants in Seasoned Equity Offerings: The case of French Unit Offerings, European Financial Management Association (EFMA), 2005-06, Milan, Italie

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Type
Communication / Conférence
Date
2005-05
Conference title
European Financial Management Association (EFMA)
Conference date
2005-06
Conference city
Milan
Conference country
Italie
Pages
40
Metadata
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Author(s)
Lasfer, Meziane
Ginglinger, Edith
Gajewski, Jean-François
Abstract (EN)
We analyse the reasons why companies issue units when they raise additional capital. In contrast to previous evidence, our results show that units are not offered to mitigate the agency conflicts or to signal security mispricing as they are predominantly issued during cold periods, in public rather than in rights offerings, and when the issue is underwritten. In contrast, the results indicate that companies choose to offer units to circumvent the offer price regulation and to underprice their seasoned equity offering so as to minimise the issue cost and the risk of failure of the issue. These results provide support for the net proceeds maximization hypothesis.
Subjects / Keywords
Warrants; Equity Issue; Flotation Method; Unit Offerings
JEL
G15 - International Financial Markets
G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
G24 - Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies