Warrant Seos in an Emerging Market: Evidence from Thailand

Eckbo et al. (2006) point out that Seasoned Equity Offering (SEO) companies need to concern for flotation costs, both of direct and indirect, when issuing newly shares. Previous literatures (i.e. Burton et al., 1999; Masulis and Shivakumar, 2002; Corwin, 2003; and Walker and Yost, 2007), considered mainly stock price reaction and underpricing mostly in the U.S. and other developed markets. In contrast, there is paucity of literature on SEOs in Asian markets. The purpose of this paper is to extend our empirical works on Seasoned Equity Offering (SEO) in Thailand, particularly on the areas of stock price reaction and the post-issuing performance. Instead of common stock offerings, we identified 47 firms (of 173 SEO companies) issuing newly shares via warrants between 1999 and 2006. We found that there is a negative reaction of stock prices to SEO announcements. This outcome is consistent to our prior research on common stock issuing companies. With warrant issuing, the SEO firms are impacted by the offering dilution, in comparison with those issuing via common stocks. As these preliminary consequences in the first context, we propose to pay more attention in order to examine the post-issuing performance of warrant SEO firms.