Staged equity financing

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Title: Staged equity financing
Author: Magnus, Blomkvist ; Korkeamäki, Timo ; Takalo, Tuomas
Organization: Bank of Finland
Series: Bank of Finland Research Discussion Papers
Series number: 15/2020
Year of publication: 2020
Publication date: 26.8.2020
Pages: 53
Subject (yso): arvopaperit; osakkeet; yritykset; rahoitus
Keywords: IPO; Yhdysvallat
JEL: G14; G24; G32
Other keywords: IPOs; security issuance; sequential financing
Abstract: We propose a rationale for why firms often return to the equity market shortly after their initial public offering (IPO). We argue that hard to value firms conduct smaller IPOs, and that they return to the equity market conditional on positive valuation signal from the stock market. Thus, information asymmetry is not a necessary condition for staged financing. We find strong support for these arguments in a sample of 2,143 U.S. IPOs between 1981-2014. Hard to value firms conduct smaller IPOs, and upon positive post-IPO returns, they tend to return to the equity market quickly, following the IPO.

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