Block Buying and Choice of Issue Method in UK Seasoned Equity Offers


  • Seth Armitage

    Corresponding author
    1. The author is from the University of Edinburgh. He is grateful to Owain ap Gwilym, Graham Partington, Andy Snell, Martin Walker (editor), an anonymous referee, and participants at the BAA Scottish conference 2008, BAA conference 2009 and JBFA Capital Markets conference 2009 for their comments on earlier drafts, and to Mark Brown (Arbuthnot Securities) and Susan Baldry (Argus Vickers) for information on the placing process and the shareholdings data, respectively.
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Address for correspondence: Seth Armitage, University of Edinburgh Business School, 50 George Square, Edinburgh EH8 9JY, UK.


Abstract:  Much of the new equity declined by existing shareholders in UK SEOs is bought in a few large blocks, both by other existing holders and by new investors. The paper argues that a placing process via negotiation with investors facilitates the purchase of large blocks better than the alternative method of selling rights on the market, and that this helps to explain the decline of rights issues in the UK. Other explanations for use of the placing method appear to be of limited relevance, except perhaps certificaton of issuer value.