You might expect the price of a mature firms stock to decline if it an

QUESTION

You might expect the price of a mature firms stock to decline if it announces a stock offering. Would you expect the same reaction if the issuing firm were a young, rapidly growing company?

e possible to be financed by the retained earnings. The young and rapidly growing company requires finance to finance the investments and even investors are aware about this fact. Thus the stock offering is not likely to lead to negative signals and therefore the price of the stock is not likely to decline.

ANSWER:

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