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Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Gamestart 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. Discuss whether the drop would have been higher or lower if, ceteris paribus, (i) the number of financial analysts following the firm was lower, (ii) the company’s debt was not rated, or (iii) the company had no institutional investor ownership.
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