Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/87163
Authors: 
Berkman, Henk
McKenzie, Michael
Verwijmeren, Patrick
Year of Publication: 
2013
Series/Report no.: 
Tinbergen Institute Discussion Paper 13-153/IV/62
Abstract: 
Companies planning a private placement typically gauge the interest of potential buyers before the offering is publicly announced. Regulators are concerned with this practice, called wall-crossing, as it might invite insider trading, especially when the potential investors are hedge funds. We examine privately placed common stock and convertible offerings and find widespread evidence of pre-announcement short selling. We show that pre-announcement short sellers are able to predict announcement day returns. The effects are especially strong when hedge funds are involved and when the number of buyers is high.
Subjects: 
Insider trading
Hedge funds
Private placements
Wall-crossing
Short-selling
JEL: 
G32
Document Type: 
Working Paper

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