Regulatory Scrutiny Prior to Seasoned Equity Offerings: Evidence From SEC Comment Letters

ABSTRACT We investigate how the Securities and Exchange Commission's (SEC) oversight affects the timing and valuation of seasoned equity offerings (SEOs). SEOs receiving an SEC comment letter are associated with longer SEO registration periods. Furthermore, SEOs receiving an SEC comment letter that is publicly disclosed before the offer date are associated with larger offer price discounts. Issuers with poorer information environments are more likely to receive an SEC comment letter. Our findings are consistent with SEC scrutiny resulting in negative information being incorporated into the offer price, but only when the scrutiny is disclosed publicly and promptly.