Dutch auction

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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 of a new issue of securities where the highest price offered to buy a portion of the issue becomes the price at which the entire issue is sold. Dutch auctions are particularly important because they are the means used to sell new issues of U.S. Treasury securities. A Dutch auction begins with the securities offered at a high price and the price is gradually lowered until there is a bid. This contrasts with a commercial option that begins at a low price that is gradually raised.

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.

Dutch auction.

A Dutch auction opens at the highest price and drops gradually until there's a buyer willing to pay the amount being asked. The transaction is completed at that price.

The only securities auctions in US markets that are conducted as Dutch auctions are the competitive bids for US Treasury bills, notes, and bonds.

In contrast, a conventional commercial auction begins with the lowest price, which gradually increases as potential buyers bid against each other. The selling price is determined when no bidder will top the last offer on the table.

A double-action auction -- the system in place on US stock exchanges -- features many buyers and sellers bidding against each other to close a sale at a mutually agreed-upon price.

Dutch auction


Dutch auction

An auction in which the asking price is lowered gradually until someone is willing to pay at that level, and the property is then sold to that person. Contrast with the typical auction practice in which the auctioneer asks a high price,lowers it until someone places a bid,and then the auctioneer attempts to obtain higher bids to increase the price from there.

References in periodicals archive ?
The Reference Yield and the Dutch Auction Total Consideration for each series of the Dutch Auction Securities will be determined on 5 May 2016 at 11am, New York City time, using the methodology described in the Offer to Purchase.
The idea behind Google using a Dutch Auction IPO was to help prevent underpricing that traditionally occurs in hot IPOs and also allow small investors the ability to buy shares.
Womack, associate professor of finance at Dartmouth University, researched IPOs during the 1990s in France--where both the Dutch auction and the system which is traditional to the U.
Lateescapes' John Andersen said: "Who better to spell out exactly how a countdown Dutch Auction works than Carol?
This last feature is one Ryan considers a key advantage of the Dutch auction, because it "deals with all shareholders equally," he says.
TELECOMWORLDWIRE-23 June 2010-Motorola retires USD500m of debt securities under Dutch Auction offer(C)1994-2010 M2 COMMUNICATIONS http://www.
M2 EQUITYBITES-September 25, 2013-LifeVantage Corporation to offer up to USD40m of its common stock in modified Dutch auction tender offer(C)2013 M2 COMMUNICATIONS http://www.
Making this announcement on Monday, the company said that the tender offers consist of two separate offers: an any and all offer and a Dutch auction offer.