Placed Shares the Role of the Discount in UK Rights Issue and Open Offices
The typical seasoned offer in the UK by smaller listed companies is no longer a conventional rights issue but an issue involving placed shares. Discounts provide substantial rewards to buyers of placed shares, and are related to proxies for costs of investing in the issuer. The difficulty of rewarding buyers of rights in the market is seen as a major disadvantage of the rights issue method. The study finds a negative relation between the discount and market reaction to an issue, which possibly reflects adjustment of the offer price for anticipated change in the share price.