The Pricing of French Unit Seasoned Equity Offerings

Units are bundles of common stock and warrants. By issuing units, firms precommit to a future and uncertain seasoned offering at the exercise price of the warrants. This study shows that the issuance of units seasoned offerings in France is accompanied by significant abnormal returns of on average 9 to 12%, depending on the computing methods. Underpricing increases with the risk of the issuer and the relative size of the future seasoned equity issue linked to warrant exercises. Our results are consistent with our signaling hypothesis