Article1996

An Empirical Investigation of Short-Selling Activity Prior to Seasoned Equity Offerings

Assem M. Safieddine · William J. Wilhelm

158 citations0/0 files storedThe Journal of Finance

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Financial Markets and Investment Strategies Corporate Finance and Governance Financial Analysis and Corporate Governance

Abstract

ABSTRACT We investigate the nature and magnitude of short‐selling activity around seasoned equity offerings, the relation between short‐selling activity and issue discounts, and the consequences of the Securities and Exchange Commission (SEC's) adoption of Rule 10b‐21 in response to concerns about manipulative short‐selling practices. Seasoned offerings are characterized by abnormally high levels of short selling and option open interest. Higher levels of such activity are related to lower expected proceeds from the issuance of new shares. Where it could not be circumvented, Rule 10b‐21 appears to have curbed short‐selling activity and reduced issue discounts.

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1986The theory and practice of econometrics 1991The Long‐Run Performance of initial Public Offerings 1986Why new issues are underpriced 1986Investment banking, reputation, and the underpricing of initial public offerings 1990Initial Public Offerings and Underwriter Reputation 1986Seasoned equity offerings 1993Common stock offerings across the business cycle 1977Alternative methods for raising capital

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