The Price Phenomenon of Equity Issues-A Study on Initial Public Offerings and Seasoned Equity Offerings-
SEOIPOPrice effectsInformation asymmetryUnderpricingDiscountCapital structureManagement of enterprisesFöretagsledningManagementBusiness and Economics
The purpose of this thesis is to investigate the price effect on the initial day of trading of IPOs and the price effect on the announcement day of SEOs on Stockholm Stock Exchange. A second purpose it to conduct studies on which factors influencing the price effects and if these factors can be explained by the same fundamental ideas. Theories regarding capital structure and the pricing of IPOs and SEOs are covered. The capital structure theories involve; Miller and Modigliani's cost of captial theory, Static Tradeoff Model and the Pecking Order. The Efficient Market Hypothesis is presented and previous theories are investigated. Our results are consistent with previous studies, which imply positive initial returns for IPOs and negative announcement returns for SEOs. Factors determining the price effect in IPOs were found to be the logarithm of sales and the dummies for the IT sector, H&Q and SEB. For SEOs the factors were the discount and the percentage change in shares. Although, different variables are found to affect the pricing of IPOs and SEOs it is argued that they emanate from the same fundamental theory; information asymmetry.