• We are very grateful to our referee, Brad Jordan, for his insightful feedback through the review process. We also thank seminar participants at the University of Alabama, the College of Charleston, the Midwest Finance Association, and the Financial Management Association. We also appreciate the comments of Daniel Bradley, Sinan Gokkaya, Qin Lian, James Ligon, and Jack Wolf. We are responsible for any and all errors.


We examine seasoned equity offering (SEO) initial-day returns after controlling for the dilution effect from the SEO discount and new shares offered. Contrary to the existing literature that ignores the effect of dilution, we find that initial-day returns are not consistently positive. Modeling adjusted initial-day returns, we show that dilution-adjusted initial-day returns respond to partial price adjustments reflecting both private and public information. Additional determinants of SEO offer-day returns include lockup length, discount reversal, prior operating performance, and underwriter reputation. Long-run tests reveal that adjusted initial-day returns are not predictive of postissuance long-term performance.