A highly leveraged company announced its intention to issue new shares via a seasoned equity offering (SEO). Upon the announcement, the market price of its stock dropped by 3%. Discuss the potential reasons for this drop in the context of the pecking order theory of capital structure.
A highly leveraged company announced its intention to issue new shares via a seasoned equity offering (SEO). Upon the announcement, the market price of its stock dropped by 3%. Discuss the potential reasons for this drop in the context of the pecking order theory of capital structure.
Chapter3: Evaluation Of Financial Performance
Section: Chapter Questions
Problem 12P
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A highly leveraged company announced its intention to issue new shares via a seasoned equity offering (SEO). Upon the announcement, the market price of its stock dropped by 3%. Discuss the potential reasons for this drop in the context of the pecking order theory of capital structure.
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