The Operating Performance of Firms Conducting Seasoned Equity Offerings Tim Loughran * Department of Finance 108 PBAB University of Iowa Iowa City, Iowa 52242-1000 (319) 335-0882 Tim-Loughran@uiowa.edu and Jay R. Ritter Department of Finance Business Administration 327 University of Florida Gainesville FL 32611-7168 (352) 846-2837 jritter@dale.cba.ufl.edu July 3, 1997 Abstract: Recent studies have documented that firms conducting seasoned equity offerings have inordinately low stock returns during the five years after the offering, following a sharp run-up in the year prior to the offering. This paper documents that the operating performance of issuing firms shows substantial improvement prior to the offering, but then deteriorates. The multiples at the time of the offering, however, do not reflect an expectation of deteriorating performance. Issuing firms are disproportionately high-growth firms, but issuers have much lower subsequent stock returns than nonissuers with the same growth rate.