Social Media Management: Evidence on Seasoned Equity Offerings

We find that firms undergoing Seasoned Equity Offerings (SEOs) receive more favorable messages on financial social media platform, StockTwits, from 62 to 10 trading days prior their offerings and from 10 trading days following offerings to the expiration of lockup agreements, compared to matched non-SEO control firms. On average, SEO firms ranking in the top quartile of abnormal pre-SEO social media bullishness reduce their underpricing by 1.12%. After lockup expirations, stocks of these firms exhibit long-run return reversal and underperformance. Moreover, insiders of these firms exhibit higher net sales in the 90 days following lockup expirations. Overall, our findings suggest that SEO firms have strong incentives to actively manage their social media coverage to reduce underpricing and increase SEO proceeds.