Seasoned Equity Offerings: A Review of the Literature and Empirical Evidence
A , often called a follow-on public offering (FPO) , occurs when a company that is already publicly traded issues additional shares of stock to the market. While an Initial Public Offering (IPO) marks a company’s first entry into the public arena, a seasoned equity offering is a tool used by established firms to raise capital for expansion, debt reduction, or other strategic goals. Seasoned Equity vs. IPO: Key Differences seasoned equity
If a company issues new stock, management is implicitly saying, "Our stock is overvalued." If they believed the stock was undervalued, they would buy it back (repurchase) rather than sell it. Therefore, the market often interprets an SEO announcement as bad news. Seasoned Equity Offerings: A Review of the Literature
Studies consistently show that stock prices fall by 1-3% on average upon the announcement of a seasoned equity offering. This is the market pricing in the negative signal and the future dilution. IPO: Key Differences If a company issues new