In a takeover contest, the presence of bidders' existing debtholders, if they can be expropriated by issuing new debt with equal or senior priority, allows bidders to commit to bid more than their valuation of the target. Such commitment can be beneficial because it deters potential entry by subsequent bidders and may allow a first bidder to acquire the target at a bargain price. The cost is that if entry by subsequent bidders does nevertheless take place, because the first bidder has committed himself to bid high premia, a bidding war ensues resulting in offers that may involve excessive premia, i.e., bids that are larger than the bidders' valuation of the target.

The authors investigate the potential for manipulation due to the interaction between secondary market trading prior to a seasoned equity offering and the pricing of the offering. Informed traders acting strategically may attempt to manipulate offering prices by selling shares prior to the seasoned equity offering, and profit subsequently from lower prices in the offering. The model predicts increased selling prior to a seasoned equity offering, leading to increases in the marketmaker's inventory and temporary price decreases. Further, sinc e manipulation conceals information, the ratio of temporary to permane nt components of the price movements is predicted to increase.

We investigate the potential for manipulation due to the interaction between secondary market trading prior to a seasoned equity offering (SO) and the pricing of the offering. Informed traders acting strategically may attempt to manipulate offering prices by selling shares prior to the SO, and profit subsequently from lower prices in the offering. The model predicts increased selling prior to a SO, leading to increases in the market maker's inventory and temporary price decreases. Further, since manipulation conceals information, the ratio of temporary to permanent components of the price movements is predicted to increase.

We investigate the potential for manipulation due to the interaction between secondary market trading prior to a seasoned equity offering (SO) and the pricing of the offering. Informed traders acting strategically may attempt to manipulate offering prices by selling shares prior to the SO, and profit subsequently from lower prices in the offering. The model predicts increased selling prior to a SO, leading to increases in the market maker's inventory and temporary price decreases. Further, since manipulation conceals information, the ratio of temporary to permanent components of the price movements is predicted to increase.

In a takeover contest, the presence of bidders' existing debtholders, if they can be expropriated by issuing new debt with equal or senior priority, allows bidders to commit to bid more than their valuation of the target. Such commitment can be beneficial because it deters potential entry by subsequent bidders and may allow a first bidder to acquire the target at a bargain price. The cost is that if entry by subsequent bidders does nevertheless take place, because the first bidder has committed himself to bid high premia, a bidding war ensues resulting in offers that may involve excessive premia, i.e., bids that are larger than the bidders' valuation of the target.