Equity issuance The graph below shows the pattern of stock returns for those firms that announce equity issuances. There are two distinct patterns: (1) negative returns (or decline in price) after the announcement and (2) price run up (or 47% gain) before the announcement. How can you explain these patterns? There is an announcement related to the first pattern here. Note that the example is a "right" issue allowing shareholders to buy equity at a discounted price and the stock price movement before the announcement does not follow the second pattern 9 60 Down 3% 50 40 47% o 30 20 -400 -300 -200 -100 100 -500 Days Relative to Equity Issue Announcement Equity issuance The graph below shows the pattern of stock returns for those firms that announce equity issuances. There are two distinct patterns: (1) negative returns (or decline in price) after the announcement and (2) price run up (or 47% gain) before the announcement. How can you explain these patterns? There is an announcement related to the first pattern here. Note that the example is a "right" issue allowing shareholders to buy equity at a discounted price and the stock price movement before the announcement does not follow the second pattern 9 60 Down 3% 50 40 47% o 30 20 -400 -300 -200 -100 100 -500 Days Relative to Equity Issue Announcement