Ch. 6: Security Offerings 251
are sold through a book building mechanism. Internationally, the firm commitment book
building method is dominant in most large capital markets, while auction methods are
dominant in smaller capital markets with more concentrated share ownership, though
there is some question as to whether auctions are successful more because book build-
ing is unavailable due to regulation or minimum offer size.Jagannathan and Sherman
(2006)examine why IPO auctions are unsuccessful in the U.S. market.
2.3. Aggregate issuance activity, U.S. 1980–2003
2.3.1. Offering frequencies and cash proceeds
In order to understand the patterns in security issuance activity by U.S. firms, we start
with the grand population of 91,455 issues from the SDC over the period 1980–2003.
We then eliminate 8,173 issues for which we are unable to match the issuing firm’s
name and Cusip number in Thomson Financial’s SDC database with a corresponding
exchange-listed firm name on the University of Chicago CRSP daily stock master file
for the issue year. This leaves a total of 83,282 issues for analysis. We then restrict our
focus to the following seven major security classes:
(1) Public offerings of straight debt (N= 37 ,398, of which 18,662 are shelf offerings),
(2) Private placements of straight debt (N = 17 ,948, of which 5,983 are reg-144A
offerings),
(3) SEOs (N= 11 ,151, of which 1,645 are shelf offerings),
(4) Equity IPOs (N= 9 ,987, of which 1,063 are “unit” offerings–with warrants),
(5) Private placements of equity (N= 2 ,145, of which 83 are SEC regulation 144A
offerings),
(6) Convertible debt offerings (N= 1 ,545), and
(7) ADRs (American depository receipt stock offerings,N=453).
After excluding 2,655 “other” security issues, we are left with a sample of 80,627 secu-
rity offerings.
Table 3shows the annual frequency of offerings across the seven major security of-
fering categories. A number of regularities emerge from this table:
- For both IPOs and SEOs, the number of issues exceed 600 in years 1983, 1993, 1996
and 1997 (particularly “hot” issue markets). - The total number of straight debt offerings outnumber the total number of SEOs by
approximately three to one (37,298 vs. 11,151). - Firms use the shelf registration procedure for approximately half of the debt is-
sues (18,662 of 37,398), while fifteen percent of the SEOs are shelf issues (1,645
of 11,151). - Straight debt is issued through private placements in one-third of the offerings
(17,948 of 55,346 straight debt offerings), while one in six equity issues are sold
in private placements (2,145 of 13,296 seasoned equity issues). - In approximately ten percent of the IPOs, the stock is sold with stock warrants, which
is termed a unit offering.