Managing material information around equity accelerated bookbuilding offering

Abstract

This paper examines the informational aspects connected to the accelerated bookbuilding offering (ABO) concerning listed shares, highlighting the critical issues about the relationships between the various subjects involved — such as the seller, the financial intermediary, ie the bookrunner, the potential investors contacted to assess their interest in the transaction (procedures of wallcrossing), the investors participating in the sounding and placement — as well as the critical issues related to the announcement of the transaction and its effects on the price discovery process. In particular, the risk of disclosing inside information and insider trading are examined, using the experience of Italian markets as a case study. In this context, the relevance of taking into account the reasons behind the transaction, both for the market and for the bookrunner, is highlighted, as these reasons could constitute autonomous inside information with respect to information related to the placement, ie price and size of the transaction. Based on ABOs carried out on the Italian market between January 2010 and February 2020, the preceding reasons and the seller’s type (whether a controlling shareholder, a minority shareholder or an issuer) seem to be relevant in defining the discount associated with the ABO and, therefore, its price impact. In conclusion, hints are sketched for a possible internal procedure the bookrunner could consider to optimise its activities related to the detection of market abuse.