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1 – 5 of 5Ranajit Kumar Bairagi and William Dimovski
The purpose of this paper is to investigate the total direct costs of raising external equity capital for US real estate investment trust (REIT) initial public offerings (IPOs).
Abstract
Purpose
The purpose of this paper is to investigate the total direct costs of raising external equity capital for US real estate investment trust (REIT) initial public offerings (IPOs).
Design/methodology/approach
The study provides recent evidence on total direct costs for a comprehensive dataset of 125 US REIT IPOs from 1996 until June 2010. A multivariate OLS regression is performed to determine significant factors influencing the level of total direct costs and also underwriting fees and non‐underwriting direct expenses.
Findings
The study finds economies of scale in total direct costs, underwriting fees and non‐underwriting expenses. The equally (value) weighted average total direct costs are 8.33 percent (7.52 percent), consisting of 6.49 percent (6.30 percent) underwriting fees and 1.87 percent (1.22 percent) non‐underwriting direct expenses. The study finds a declining trend of total direct costs for post 2000 IPOs which is attributed to the declining trend in both underwriting fees and non‐underwriting direct expenses. Offer size is a critical determinant for both total direct costs and their individual components and inversely affects these costs. The total direct costs are found significantly higher for equity REITs than for mortgage REITs and are also significantly higher for offers listed in New York Stock Exchange (NYSE). Underwriting fees appear to be negatively influenced by the offer price, the number of representative underwriters involved in the issue, industry return volatility and the number of potential specific risk factors but positively influenced by prior quarter industry dividend yield and ownership limit identified in the prospectus. After controlling for time trend, the paper finds REIT IPOs incur higher non‐underwriting direct expenses in response to higher industry return volatility prior to the offer.
Originality/value
This paper adds to the international REIT IPO literature by exploring a number of new influencing factors behind total direct costs, underwriting fees and non‐underwriting direct expenses. The study includes data during the recent GFC period.
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Keywords
This chapter investigates whether non venture-backed, venture-backed and bridge financed companies going public on Germany’s Neuer Markt differ with regard to issuer…
Abstract
This chapter investigates whether non venture-backed, venture-backed and bridge financed companies going public on Germany’s Neuer Markt differ with regard to issuer characteristics, balance sheet data or offering characteristics. Moreover, this chapter contributes to the underpricing literature by focusing on the role of venture capitalists and underwriters in certifying the quality of a company. Companies backed by a prestigious venture capitalist and/or underwritten by a top bank are expected to show less underpricing at the Initial Public Offering (IPO) due to reduced ex-ante uncertainty. This analysis provides evidence to the contrary: VC-backed IPOs appear to be more underpriced than non VC-backed IPOs.
The purpose of this paper is to provide excerpts of selected Financial Industry Regulatory Authority (FINRA) Regulatory Notices issued in July and August 2007. In July 2007, FINRA…
Abstract
Purpose
The purpose of this paper is to provide excerpts of selected Financial Industry Regulatory Authority (FINRA) Regulatory Notices issued in July and August 2007. In July 2007, FINRA Regulatory Notices replaced NASD Notices to members.
Design/methodology/approach
The paper provides excerpts from NASD Notice to Members 07‐32 (July 2007), Annual Certification of Compliance and Supervisory Processes; FINRA Regulatory Notice 07‐34 (August 2007), “New Issue” Rule; FINRA Regulatory Notice 07‐36 (August 2007), Supervision of Recommendations after a Registered Representative Changes Firms; FINRA Regulatory Notice 07‐37 (August 2007), Options Position and Exercise Limits; FINRA Regulatory Notice 07‐39 (August 2007), Order Audit Trail System (OATS); and FINRA Regulatory Notice 07‐40 (August 2007), Three Quote Rule.
Findings
The paper finds useful information in each of these notices.
Originality/value
The paper provides direct excerpts that are designed to provide a useful digest for the reader and an indication of regulatory trends.
Details
Keywords
This is the first REIT paper to seek to empirically examine potential influencing factors on the discounts and underwriting fees of Australian REIT rights issues.
Abstract
Purpose
This is the first REIT paper to seek to empirically examine potential influencing factors on the discounts and underwriting fees of Australian REIT rights issues.
Design/methodology/approach
Using a methodology similar to Owen and Suchard, and Armitage, a sample of 62 A‐REIT rights issues during 2001‐2009 is analyzed. A variety of potential factors influencing discounts and underwriting fees are explored.
Findings
Over A$20 billion was raised by A‐REIT rights issues during 2001‐2009 (this around three times that raised through A‐REIT initial public offerings during the same period). The mean offer price was discounted around 9.5 percent from the current market price and underwriting fees averaged 2.9 percent of gross proceeds raised – both substantially less than for industrial rights issues. The standard deviation of daily returns for the past year appears to influence the percentage discount offered to subscribers. This volatility was particularly noticeable in 2008 and 2009, during the global financial crisis, where new issues were discounted substantially so as to raise equity to repay debt. This historical risk variable appears paramount in determining the discounts to subscribers and fees to underwriters.
Practical implications
A‐REITs seeking to minimize the discounts offered to subscribers and to minimize their underwriting costs with rights issue equity capital raisings must first minimize their share price volatility.
Originality/value
This paper adds to the international costs of capital raising literature of REITs by examining such costs with A‐REIT rights issues and is the first paper to examine factors influencing these costs.
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Keywords
In response to the financial crisis that began in 2007, United States President Barack Obama signed H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act, into…
Abstract
In response to the financial crisis that began in 2007, United States President Barack Obama signed H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act, into law on July 21, 2010. “Dodd-Frank” is intended to correct certain problems in financial markets by federally regulating the activities of independent municipal financial advisors and comprehensively expanding regulatory oversight over credit rating agencies. This article reviews the legislation and its financial management rationale, and discusses its actual and potential impact on the future operations of the municipal securities market and its participants.