Underwriter Competition in Accelerated Seasoned Equity Offerings

Abstract

We show competition between underwriters even when fees are clustered. We study accelerated seasoned equity offerings (SEOs), which are now the predominant form of public SEO in the U.S., Canada, and Europe. Underwriters compete by establishing capacity sufficient to allow them to maintain close relationships with issuers, in order to be able to identify when issuers will need funds and conduct issues quickly. Speed of issue is the key consideration for issuers using accelerated SEOs, and managing capacity is a key concern of underwriting firms. We test predictions from a model of strategic choice with field study data.