Equity Issuance of Health Care Firms after the 2007 Market Crash and the 2010 Affordable Care Act

James C. Brau, PhD, CFA, J. Troy Carpenter, MBA


We provide an empirical analysis of 195 initial public offerings (IPOs) and 547 seasoned equity offerings (SEOs) of health care firms that issued between 2008 and October 2016. This period represents eight years after the US financial crisis of late 2007 and also includes all equity issuances since the passage of the Affordable Care Act of late 2010. We compare and contrast our results with those of Brau and Holloway (2009) who study health care equity issuances from 1970-2008. We find that global health care issues in both the IPO and SEO markets are significantly over-represented in both the post-crash (2008-2010) and post-ACA years (2011-2016) vis-à-vis the overall equity markets. Consistent with prior studies, we show the existence of first-day underpricing in both IPOs and SEOs, along with poor long-run abnormal stock returns. We estimate cross-sectional multivariate regression models to explain the underpricing and long-run returns. 

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