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Is the Dutch Auction IPO a Good Idea?

Anita I. Anand

University of Toronto - Faculty of Law

September 1, 2005

Yale Law & Economics Research Paper No. 320

The Google IPO raised the question of whether Dutch auctions are preferable to the traditional bookbuilding method of financing. Some argue that Dutch auctions make public offerings more efficient in terms of price discovery by leaving less money on the table. They further argue that Dutch auctions are more fair, since underwriters do not allocate securities to preferred clients, thereby allowing for a more equitable allocation among institutional and retail investors. I suggest that the Dutch auction is not necessarily more fair and may in fact lead to less efficient capital markets. I argue that reform of the current system is unnecessary because of capital market composition and, in particular, the means by which a majority of retail shareholders invest in securities.

Number of Pages in PDF File: 42

Keywords: IPO, auction, bookbuilding, shareholders, Google

JEL Classification: G3, K00, K22, L20

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Date posted: September 5, 2005  

Suggested Citation

Anand, Anita I., Is the Dutch Auction IPO a Good Idea? (September 1, 2005). Yale Law & Economics Research Paper No. 320. Available at SSRN: https://ssrn.com/abstract=794464 or http://dx.doi.org/10.2139/ssrn.794464

Contact Information

Anita I. Anand (Contact Author)
University of Toronto - Faculty of Law ( email )
78 and 84 Queen's Park
Toronto, Ontario M5S 2C5

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