Issuing equity in the face of bad news

We provide evidence on managerial motives for raising equity in a new setting by comparing firms that withdraw filed seasoned equity offerings to those that complete them following extreme negative filing period returns. Similar to papers showing that stock price run-ups are not sufficient to predict equity issuance, we find that extremely negative filing period returns do not always lead to withdrawals. Our results indicate that industry-level investment opportunities and firms’ cash needs, rather than overvaluation, drive the decision to issue equity. Additionally, we provide novel evidence that firms issue equity to maintain their stock exchange listing status.