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Appears in Collections:Accounting and Finance Working Papers
Title: Are the Discounts in UK Open Offers and Placings Due to Inelastic Demand?
Author(s): Armitage, Seth
Dionysiou, Dionysia
Gonzalez, Angelica
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Citation: Armitage S, Dionysiou D & Gonzalez A (2012) Are the Discounts in UK Open Offers and Placings Due to Inelastic Demand?. Social Science Electronic Publishing, Inc.
Keywords: seasoned equity offer
inelastic demand
open offer
JEL Code(s): G30, G32
Issue Date: 7-Jul-2012
Publisher: Social Science Electronic Publishing, Inc
Abstract: This paper investigates the large and diverse discounts in UK open offers and placings. Large discounts are a substantial cost to shareholders who do not buy new shares. The existing literature mainly examines US firm-commitment offers and private placements, but UK open offers and placings differ from both types of US offer. The paper presents evidence that inelastic demand, illiquidity of the issuer's shares, and financial distress are key determinants of the discount. The effects of inelastic demand and distress are much more apparent in UK than in US SEOs. We argue that institutional features obscure the role of these variables in the US context.
Type: Working or Discussion Paper
Affiliation: University of Edinburgh
Accounting and Finance
University of Edinburgh

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