Block Buying and Choice of Issue Method in UK Seasoned Equity Offers

Much of the new equity declined by existing shareholders in UK SEOs is bought in a few large blocks, both by other existing holders and by new investors. The paper argues that a placing process via negotiation with investors facilitates the purchase of large blocks better than the alternative method of selling rights on the market, and that this helps to explain the decline of rights issues in the UK. Other explanations for use of the placing method appear to be of limited relevance, except perhaps certificaton of issuer value.