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Journal of Finance Vol. 51 No. 2 1996

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

Assem Safieddine; William J. Wilhelm1

1 Safieddine is from the Eli Broad College of Business, Michigan State University; Wilhelm is from the Wallace E. Carroll School of Management, Boston College. We thank Christopher Baum, Larry Benveniste, Scott Gibson, Kathleen Hanley, Edie Hotchkiss, Ed Kane, S. Joseph Khoury, Tim Mech, Hamid Mehran,

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.

DOI
10.1111/j.1540-6261.1996.tb02701.x
Volume
51
Issue
2
Pages
729-749
Language
en
Sources
crossref openalex

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