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Examining Shareholder Participation and Quality Firm Signals in Private Placements and Rights Offerings

This analysis delves into sample selection and exclusion criteria across various equity issuance mechanisms, specifically standalone private placements and rights offerings. Utilizing multivariate probit regression models, we uncover that high-quality firms tend to issue at lower price discounts while demonstrating lower idiosyncratic risks. Our findings reveal that firms with extensive ownership concentration prefer fixed-price placements, whereas larger entities favor standalone placements with book-building strategies, thus signaling their quality effectively to investors.

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Examining Shareholder Participation and Quality Firm Signals in Private Placements and Rights Offerings

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  1. Table 2: Summary of Sample Selection and Exclusions

  2. Table 2: Summary of Sample Selection and Exclusions

  3. Panel D: Standalone Placements

  4. Table 8: Modelling Expected Shareholder Takeup

  5. Table 9: Multivariate Probit Models of choosing Standalone Private Placement and pure rights offerings Decisions Panel A: Multivariate Probit Regression Analysis of the decision to issue a Standalone Private Placements with fixed price

  6. Panel B: Multivariate Probit Regression Analysis of the decision to make a pure Rights Offering (without pre-renouncement)

  7. Panel C: Multivariate Probit Regression Analysis of the decision to issue a Standalone Public Placement with book-building

  8. Table 10: Quality of the Firm, Ownership Concentration and the Subscription Price Discount

  9. Conclusion • We find support for our hypotheses that • High quality firms will signal their quality by selecting lower issue price discounts irrespective of the SEO issuance mechanism used; • High quality issuers will have lower Idiosyncratic risk. • High quality firms fully underwrite their shares to certify their quality

  10. Conclusion • Widely dispersed and the largest firms will choose standalone placements with book building;

  11. Conclusion • Firms with higher (lower) ownership concentration and lower (higher) shareholders expected takeup will choose fixed price placements (rights offerings)

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