Business, Legal & Accounting Glossary
Dutch auction, also known as descending price auction, uses a bidding process to find an optimal market price for the stock, the highest price at which an issuing company can sell all the available shares. An alternative to the traditional negotiated pricing process used by underwriters to set IPO prices, it was most recently employed by Google and is used for US Treasury auctions. Named after the famous auctions of Dutch tulip bulbs in the 17th century, it is based on a pricing system devised by Nobel prize winning economist William Vickrey.
A Dutch auction started in Netherlands’ farms, is a descending price auction for multiple identical items. A true Dutch auction starts with a prohibitive price and is bid lower. Early winners in a strict Dutch auction pay more and later winners pay less till the Dutch auction ends. A more familiar variant of Dutch auction starts with a reserve price. Bidders bid at or above that base price for the number of items they want. In this Dutch auction, successful bidders pay only the price of the lowest accepted bid. The Dutch auction in an Initial Public Offering (IPO) is actually a sealed-bid, uniform second-price variant. In the traditional IPO, the investment bank allocates shares at deflated prices to select investors who make a good profit in the secondary market. In the Dutch auction IPO, all applicants are on a level-playing field and allottees pay a price only slightly lower than the highest bid. The issuer collects more capital with a Dutch auction IPO.
The dutch auction was used to sell the securities as we had determined it was the best way to obtain the highest price.
I heard about the dutch auction and I did not want any part of it, because it bored me to tears and made me feel awkward.
Fuku Holdings, Inc conducted a Dutch auction to price their shares as it was cheaper than using underwriters to negotiate a price.
auction rate securities (ARS)
auction rate
auction market preferred stock
stock repurchase plan
stated rate auction preferred stock
Dutch Auction Preferred Stock
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This glossary post was last updated: 30th October, 2021 | 0 Views.