Printer Friendly
The Free Dictionary
989,663,247 visitors served.
?
Dictionary/
thesaurus
Medical
dictionary
Legal
dictionary
Financial
dictionary
Acronyms
 
Idioms
Encyclopedia
Wikipedia
encyclopedia
?

Dutch auction

   Also found in: Dictionary/thesaurus, Wikipedia, Hutchinson 0.03 sec.
Dutch Auction
An auction where the price on an item is lowered until it gets its first bid, and then the item is sold at that price.

Notes:
The U.S. Treasury (and other countries) uses a Dutch auction when it sells securities.

See also: Auction Market

Dutch auction
Auction in which the lowest price necessary to sell the entire offering becomes the price at which all securities offered are sold. This technique has been used in Treasury auctions. Often used in risk arbitrage. Auction system in which the price of an item (stock) is gradually lowered until it meets a responsive bid (government T-bills) or offer (corporate repurchase) and is sold. In a corporate repurchase, a range of prices is set by the company within which shareholders are invited to tender their shares. The tender offer is open for a specific period of time (i.e., 20 days), and the quantity of stock to be purchased is stated as well, subject to proration if more shares are tendered than can be legally purchased under the stated terms (often an additional amount equal to 20% of outstanding shares can be purchased). The price paid is that at which the amount stated to be purchased can be sold. Compare to double auction system.

Dutch auction
An auction in which the seller reduces the offering price until a level can be found that clears the market. This is the price at which all sales will take place. The auction for Treasury bills is similar to this except that the Treasury accepts the highest bids first and works through progressively lower bids until an issue is completely sold. Thus, in a Treasury bill auction, various prices are accepted.
Case Study Whittaker Corporation announced plans in 1986 to sell several of its business units and use the proceeds to repurchase a significant proportion of its own outstanding stock. The stock buyback was to occur through a process by which Whittaker's shareholders could submit offers for varying numbers of shares at various prices. A shareholder might submit an offer to sell 500 shares at $35; 500 shares at $34; and 500 shares at $33, for example. Depending on the number of available shares and the prices offered by the shareholders, Whittaker would then set a price at which it would purchase the stock. Thus, if Whittaker set a price of $34.75, the shareholder would sell 1,000 shares (those offered at $34.75 or less) at a price of $34.75 each. Whittaker undertook the Dutch auction to determine the lowest price at which it could buy back the desired number of shares.

?Page tools
Printer friendly
Cite / link
Email
Feedback
Add definition
? Mentioned in ? References in periodicals archive
 
Brookfield Homes Corporation commenced its Dutch auction tender offer for up to 5,000,000 shares of its outstanding common stock, at prices ranging from $15.
com), an internet-based Dutch auction platform for the investment-grade bond market.
A Dutch auction allows a company to specify the number of shares it plans to repurchase within a set time frame, as well as a specific price range within which shareholders may tender their shares.
 
Financial browser? ? Full browser
 
 
Financial Dictionary
?

Disclaimer | Privacy policy | Feedback | Copyright © 2008 Farlex, Inc.
All content on this website, including dictionary, thesaurus, literature, geography, and other reference data is for informational purposes only. This information should not be considered complete, up to date, and is not intended to be used in place of a visit, consultation, or advice of a legal, medical, or any other professional. Terms of Use.