BOSS announced its intention to issue new shares via a seasoned equity offering (SEO). Upon the announcement, the market price of its stock dropped by 3%. Discuss the potential reasons for this drop in the context of the pecking order theory of capital

BOSS announced its intention to issue new shares via a seasoned equity offering (SEO). Upon the announcement, the market price of its stock dropped by 3%. Discuss the potential reasons for this drop in the context of the pecking order theory of capital

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 26P

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Concept explainers

Stockholder's Equity

The stockholders’ equity (often referred to as the book value of the company) is the number of assets available to the stockholder after its entire liabilities is paid off. The stockholders’ equity is also sometimes referred to as owner's equity. The stockholders’ equity or book value generally includes common stock, treasury stock retained earnings. It is an indicator of a company's financial strength and is an important item on the company's balance sheet.

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BOSS announced its intention to issue new shares via a seasoned equity offering (SEO). Upon the announcement, the market price of its stock dropped by 3%. Discuss the potential reasons for this drop in the context of the pecking order theory of capital

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