Seasoned Equity Offerings: Evaluation of post-SEO issuance performance

Level: Undergraduate | Grade: 2.1 | Approx. Word Count: 2,750

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Overview

Public corporations use SEOs as a means of raising additional capital. Yet research has indicated that post-SEO the shares underperform the market by between 20 and 35% (performance of the firm. The aim of this study is to assess the validity of this claim by the post-performance of two firms listed in diverse international stock markets.

A seasoned equity offering (SEO) will occur at some stage after the corporation has been trading as a public company for some time. There are many reasons why a corporation might decide to issue an SEO, including restructuring debt or to raise additional capital for a specific project, such as to fund a takeover bid. However, investors are reliant on the corporate to deliver the return on investment that has prompted their decision to invest in the equity, which, as all scholars and investors are aware, is not always the case (Walker and Yost 2008).