SIRCA Breakfast Forums
November 2003
Hazardous to your wealth? Investing in ASX firms making rights
issues and private placements
SIRCA invites you to a complimentary breakfast forum to discuss:
“Hazardous to your wealth? Investing in ASX firms making rights
issues and private placements” by Dr Raymond da Silva Rosa,
Dr Robert Durand and Ms Olivia Ker, SIRCA & UWA Business School.
| Date |
26th November, 2003 |
| Time |
7.30 for 7.45am start. The Seminar will conclude
at 8.45am. |
| Where |
Level 2, 9 Castlereagh Street, Sydney.
SIRCA Breakfast Forums are held at our Sydney CBD office with
places deliberately limited to ensure frank and open discussion. |
| RSVP |
Frances Carlow, Business Development Manager
Email: fcarlow@sirca.org.au
Tel: +61 2 9236 9114 |
 Download
Research Paper (PDF, 284KB)
Download
Presentation Slides (PDF, 213KB)
What makes the study interesting?
- Comprehensive sample of firms
- Latest research techniques incorporated
- Independent analysis
- Results relevant to design of stock selection methods aimed
at outperforming the market
Summary of the findings of this research
Many US studies indicate that companies that issue private placements
and rights issues subsequently underperform. For instance, Loughran
and Ritter (1995) find that the average raw return to US firms issuing
3,702 SEOs is only 7% per year in the five years following the offering
while matched non-issuing firms earned 15% per year. Loughran and
Ritter observe that these findings suggest investing in firms making
rights issues and private placements is hazardous to your wealth
Sample size
We analyse the short and long run share market performance of ASX
firms that made 2,890 private placements and 536 rights issues over
the period January 1993 through to 31 December 1999. The length
of period covered and large sample size makes our study the most
comprehensive Australian study to date. We also incorporate the
latest research techniques to control for the now well known difficulties
in measuring long-run share market performance.
Results
Our findings indicate that the average performance of Australian
companies making rights issues and private placements is indeed
consistent with the US evidence. However, there are important differences
in performance among sub-samples. Some SEOs and rights issues are
followed by over-performance, on average, and it is possible to
identify some of the characteristics they have in common.
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