Is the Dutch Auction IPO a Good Idea?

42 Pages Posted: 5 Sep 2005  

Anita I. Anand

University of Toronto - Faculty of Law

Multiple version iconThere are 2 versions of this paper

Date Written: September 1, 2005

Abstract

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.

Keywords: IPO, auction, bookbuilding, shareholders, Google

JEL Classification: G3, K00, K22, L20

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

Anita I. Anand (Contact Author)

University of Toronto - Faculty of Law ( email )

78 and 84 Queen's Park
Toronto, Ontario M5S 2C5
Canada

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