Returns and Discount Rates in General Public Seasoned Equity Offerings

Yoon, Pyung Sig

Korean Journal of Financial Studies 2016;45(1):89-117.
Published online February 28, 2016.

Pyung Sig Yoon

일반공모 방식 유상증자의 수익률과 할인율에 관한 연구

윤평식

Abstract

This study examines the long-term and short-term effects, trading volume, firm characteristics, new shareholders’ return, listing effects, and discount rates of general public seasoned equity offerings (SEO). The major findings are as follows. The 44% of the 777 SEOs is made by firms that are delisted within three years after offerings and the recent surge of ‘small-amount SEOs’ is more evidence of the seriousness of SEO firms’ cash shortage. Investors who subscribed new shares earned 8.3% on average on the two days before the listing date. This date is the first date where new shareholders can sell their shares. The return earned by old shareholders from the announcement date to the listing date is 18% lower than that earned by new shareholders and that 18% is almost equivalent to the average discount rate of 21%. The cumulative abnormal return from the announcement date to twelve months after the listing date is -45%. The above results show that general public SEO seriously affects old shareholders’ wealth and the maximum 30% discount rate should be reduced.

Key Words: 공모수익률,상장효과,유상증자,일반공모,할인율,Discount Rate,General Public Offering,Listing Effects,Seasoned Equity Offerings,SEO Subscription Return