Hostname: page-component-77c89778f8-sh8wx Total loading time: 0 Render date: 2024-07-17T01:57:22.975Z Has data issue: false hasContentIssue false
  • English
  • Français

At-the-Market Offerings

Published online by Cambridge University Press:  10 September 2018

Matthew T. Billett ,
Ioannis V. Floros  and
Jon A. Garfinkel
Get access Rights & Permissions [Opens in a new window]

Abstract

We study at-the-market (ATM) equity offerings, which are direct share issuances sold in the secondary market that forgo underwriters and “dribble-out” shares over time rather than raising them all at once. Enabled in 2008, their use has increased dramatically, and in 2016, their incidence and total proceeds were, respectively, 63% and 26% of those for seasoned equity offerings (SEOs). Determinants of firms’ choice between ATMs and SEOs are consistent with the costly certification hypothesis of Chemmanur and Fulghieri (1994). We also find that 65% of ATM proceeds are used to stockpile cash compared to 84% of SEO proceeds.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 54 , Issue 3 , June 2019 , pp. 1263 - 1283
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2018 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

1

We are grateful to Paul Malatesta (the editor) and especially Jay Ritter (the referee) for guidance and suggestions. We also thank Audra Boone, Dave Mauer, Daniel C. de Menocal, Jr., Ann Sherman, Joshua White, and seminar participants at the University of Mississippi for helpful comments. Part of the analysis in the paper was completed while Floros was visiting the U.S. Securities and Exchange Commission (SEC). The views expressed herein are those of the authors and do not necessarily represent the views of the SEC. Jeffrey Emrich, Jinsook Lee, and Dongping Xie provided excellent research assistance.

References

Ai, C., and Norton, E. C.. “Interaction Terms in Logit and Probit Models.” Economics Letters, 80 (2003), 123–129.Google Scholar
Billett, M. T.; Elkamhi, R.; and Floros, I. V.. “The Influence of Investor Identity and Contract Terms on Firm Value: Evidence from PIPEs.” Journal of Financial Intermediation, 24 (2015), 564–589.Google Scholar
Billett, M. T., and Yu, M.. “Asymmetric Information, Financial Reporting, and Open-Market Share Repurchases.” Journal of Financial and Quantitative Analysis, 51 (2016), 1165–1192.Google Scholar
Bonaimé, A. A.; Hankins, K. W.; and Jordan, B. D.. “The Cost of Financial Flexibility: Evidence from Share Repurchases.” Journal of Corporate Finance, 38 (2016), 345–362.Google Scholar
Booth, J. R., and Smith, R. L.. “Capital Raising, Underwriting, and the Certification Hypothesis.” Journal of Financial Economics, 15 (1986), 261–281.Google Scholar
Chaplinsky, S., and Haushalter, D.. “Financing under Extreme Risk: Contract Terms and Returns to Private Investments in Public Equity.” Review of Financial Studies, 23 (2010), 2789–2820.Google Scholar
Chemmanur, T. J., and Fulghieri, P.. “Investment Bank Reputation, Information Production, and Financial Intermediation.” Journal of Finance, 49 (1994), 57–79.Google Scholar
Clinton, S.; White, J.; and Woidtke, T.. “Differences in the Information Environment Prior to Seasoned Equity Offerings under Relaxed Disclosure Regulation.” Journal of Accounting and Economics, 58 (2014), 59–78.Google Scholar
Dechow, P. M., and Dichev, I. D.. “The Quality of Accruals and Earnings: The Role of Accrual Estimation Errors.” Accounting Review, 77 (2002), 35–59.Google Scholar
Dittmar, A., and Field, L. C.. “Can Managers Time the Market? Evidence Using Repurchase Price Data.” Journal of Financial Economics, 115 (2015), 261–282.Google Scholar
Eckbo, B. E.; Masulis, R. W.; and Norli, O.. “Security Offerings.” In Handbook of Corporate Finance: Empirical Corporate Finance, Vol. I, B. E. Eckbo, ed. Amsterdam, The Netherlands: Elsevier/North-Holland (2007), chap. 6.Google Scholar
Francis, J.; Lafond, R.; Olsson, P.; and Schipper, K.. “The Market Pricing of Accruals Quality.” Journal of Accounting Economics, 39 (2005), 295–327.Google Scholar
Gao, X., and Ritter, J. R.. “The Marketing of Seasoned Equity Offerings.” Journal of Financial Economics, 97 (2010), 33–52.Google Scholar
Gustafson, M. T., and Iliev, P.. “The Effects of Removing Barriers to Equity Issuance.” Journal of Financial Economics, 124 (2017), 580–598.Google Scholar
Huang, R., and Ritter, J. R.. “Corporate Cash Shortfalls and Financing Decisions.” Working Paper, University of Florida (2017).Google Scholar
Lee, G., and Masulis, R. W.. “Seasoned Equity Offerings: Quality of Accounting Information and Expected Flotation Costs.” Journal of Financial Economics, 92 (2009), 443–469.Google Scholar
McLean, R. D.“Share Issuance and Cash Savings.” Journal of Financial Economics, 99 (2011), 693–715.Google Scholar
Morrison & Foerster LLP. “Frequently Asked Questions about At-the-Market Offerings.” White Paper (2017).Google Scholar
Petersen, M. A.“Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches.” Review of Financial Studies, 22 (2009), 435–480.Google Scholar
Shroff, N.; Sun, A. X.; White, H. D.; and Zhang, W.. “Voluntary Disclosure and Information Asymmetry: Evidence from the 2005 Securities Offering Reform.” Journal of Accounting Research, 51 (2013), 1299–1345.Google Scholar
Supplementary material: File

Billett et al. supplementary material

Online Appendix

Download Billett et al. supplementary material(File)
File 318.4 KB