The Financial Economics of Privatization

By William L. Megginson | Go to book overview

6
The Structure and
Investment Performance of
Privatization Share
Offerings

Only 20 years ago, the largest share offering in world history had raised less than $1.5 billion, and very few share offerings ever raised more than $250 million. However, since the first British Telecom offering in November 1984, which raised an unheard of $4.9 billion, no fewer than 183 share issue privatizations have raised at least $1 billion, and 16 have raised over $10 billion! Twenty years ago, a very small fraction of the adult population owned shares in any developed country except the United States, and share ownership was even more highly concentrated in developing countries. Today, between one-sixth and onethird of the adult population owns shares in most developed (and in a few developing) countries, and share ownership exceeds 40 percent in at least three—Sweden, Australia, and the United States.

Twenty years ago, the total value of all of the world’s listed companies was a little over $3 trillion, a figure that was less than 40 percent of world GDP. By early 2000, global market capitalization reached $35 trillion, a figure equal to global GDP. Even after world market capitalization declined to its low point of about $20 trillion during the summer of 2002, this still equaled roughly two-thirds of global output, and the global rebound in stock value over the next two years has brought worldwide valuations back near $30 trillion by the summer of 2004. In other words, the past 20 years have witnessed a revolution in global finance and, outside of the United States, the most important factor in this transformation has been the spread of SIP programs around the world.

This chapter examines the structure and investment performance of SIPs. As we will see, these often massive share issues differ fundamentally from privatesector share issues in almost all respects, except that both use the same financial instrument. The insignificantly positive long-term investment performance of SIPs also differs dramatically from the significantly negative long-run returns observed for private share offerings. Additionally, SIPs were the first truly large share offerings of any type in most countries, so privatizations effectively inaugurated those nations’ investment banking industries. Even in the handful of countries (Britain,

-203-

Notes for this page

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this book

This book has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this book

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this page

Cited page

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited page

Bookmark this page
The Financial Economics of Privatization
Table of contents

Table of contents

Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this book

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen
/ 523

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.