Seasoned Equity Offerings on the Nasdaq: New Evidence on the Asymmetric Information Discount

Abstract

This study investigates the effect of seasoned equity offerings (SEOs) on the NASDAQ. The results confirm that, most of the time, news of a seasoned equity offering is associated with negative stock returns. This is consistent with earlier research that interpreted this effect as indicating the existence of an asymmetric information discount (AsID). However, of the offerings observed in this study, only 65% experienced negative filing-date excess returns and dilutions. This percentage is much lower than the 80% plus reported in earlier studies and falls to approximately 50% by the time issuance take place. Earlier research, furthermore, suggested that these AsIDs were likely to be long lasting. The novelty in this paper is that, in contrast, the discounts that we observe around the SEOs’ filing dates disappear on the average by the time the stock in the SEOs is actually issued. In short, we find that AsIDs on the NASDAQ on the average are short lived and in most cases, are reversed in the relatively brief interval between filing and issuance.