Google Considering Dutch Auction For IPO; Investment Bankers Crying

I disagree that the IPO public sale method fits with Google’s general nature. Google has succeeded by providing value to users, not by screwing the tiny guy whenever possible. IPO guarantees a fair price for the stock, eliminates money remaining up for grabs, and for that reason decreases flipping. You seem to consider your claims as proven fact.

Have you viewed the history of IPO auctions in Argentina, Japan, Singapore, Taiwan, Australia, the U.K., Switzerland, Portugal, France, Turkey, or Israel? Have you carefully thought it through? How do a uniform price (mistakenly called a Dutch) auction “guarantee a good price for the stock”? What is there to prevent free riders from bidding the price up exorbitant, as they’ve done far away?

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The theory behind IPO auctions is dependant on a private values establishing, where everyone “just understands” how much the auctioned item will probably be worth to them. But, if there’s some doubt about the value, and if time and effort can help someone to get a better idea, a consistent price auction is an extremely risky then, inefficient way to set the price.

Your claim is so vague that I can’t tell whether you’re discussing theories or practice (or just duplicating the Hambrecht sales page). But both theory and previous experience indicate a uniform-price auction does not assure an accurate or “fair” price. Auctions will be the least common form of price environment.

The last offering price is the “clearing price” and all investors are billed the clearing price for their shares. All shares can be purchased at the one price, if any trader was willing to pay an increased price even. An auction can be beneficial for the issuer–generally it incurs lower costs and it should be in a position to maximize proceeds.

However, the potential lack of aftermarket demand can cause stocks offered this way to languish in the currency markets which does not bold well for any future offerings it could have prepared. But to Google, this circumstance won’t happen maybe. So, if use auction, Google can save costs.

Dutch Auction is one kind of public sale developed by WR Hambrecht in 1998 also called “openIPO”, in which the investor set the price tag on an offering through an open beta process. The clearing price is the best price of which all the stocks can be sold. This price is not used by Hambrecht.

Auctions that price below market-clearing is known as “dirty” auctions, or as “leaving something up for grabs”, and they are found in the U.K., France, and other countries. After that, they transformed the guideline to make it harder for everyone to determine if the offering was priced below the market clearing.

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