Does Rule 10b-21 Increase SEO Discounting?
37 Pages Posted: 4 Mar 2007 Last revised: 29 Jul 2010
There are 2 versions of this paper
Does Rule 10b-21 Increase SEO Discounting?
Does Rule 10b-21 Increase SEO Discounting?
Date Written: June 2010
Abstract
Short sale constraints prior to seasoned equity offers, imposed by Rule 10b-21 in 1988, are believed to compromise pricing efficiency and contribute to the large temporal increase in offer price discounting. This study provides additional insights by examining shelf-registered offers, which were exempt from pre-issue short sale constraints until 2004. The results suggest that pre-issue short sale constraints do not influence the level of discounting in seasoned equity offers. Moreover, this study reports that the recent temporal increase in discounting is due to a greater prevalence of overnight shelf offers, which are associated with relatively large offer price discounts.
Keywords: seasoned equity offer; discounting; short sale constraints; shelf registration
JEL Classification: G14; G32
Suggested Citation: Suggested Citation
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