Does Rule 10b-21 Increase SEO Discounting?

37 Pages Posted: 4 Mar 2007 Last revised: 29 Jul 2010

See all articles by Don M. Autore

Don M. Autore

Florida State University - College of Business

Multiple version iconThere are 2 versions of this paper

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

Autore, Don M., Does Rule 10b-21 Increase SEO Discounting? (June 2010). Available at SSRN: https://ssrn.com/abstract=967673 or http://dx.doi.org/10.2139/ssrn.967673

Don M. Autore (Contact Author)

Florida State University - College of Business ( email )

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