Abstract
Companies issuing stock during 1970 to 1990, whether an initial public offer ng or a
seasoned equity offering, have been poor long-run investments for investors. During
the five years after the issue, investors have received average returns of only 5
percent per year for companies going public and only 7 percent per year for
companies conducting a seasoned equity offer. Book-to-market effects account for
only a modest portion of the low returns. An investor would have had to invest 44
percent more money in the issuers than in nonissuers of the same size to have the
same wealth five years after the offering date.
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