UNIT INITIAL PUBLIC OFFERINGS - A FORM OF STAGED FINANCING

Units are bundles of common stock and warrants. By selling initial public offerings (IPOs) of units, firms precommit to sell more stock in the future at the warrant's exercise price. Sequential offerings of this type reduce the agency costs of giving management a potential free cash now at the IPO. Consistent with this theory, firms that choose unit IPOs are smaller, have less income and assets in relation to their IPO proceeds. and are less likely to survive than firms that issue shares.