We study the smart-money and dumb-money hypotheses of institutional investments by examining a sample of seasoned equity offerings (SEOs) from 1981 to 2005. We predict that if institutional investors care about equity issuer’s long-term prospect and they have superior information about the issuer’s fundamentals, then institutional investment in SEO should be positively related to both short-term and long-term post-SEO returns of issuer. However, our result indicates that although institutional investment, particularly short-term one, has a significantly positive impact on the issuer’s stock return up to twelve months post-offering, it has a significantly negative impact on the issuer’s return beyond one year. Our further analysis shows that short-term institutional investment in SEO is significantly related to investor sentiment proxied by pre-offering run-ups but post-offering declines in stock price and accounting profitability. Collectively, this study suggests that institutional investors, especially short-term investors, are not really more informed about the fundamentals of the equity issuers than other investors.