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 ?
As more fully described in the Offer to Purchase, the Clearing Premium for the Offer for the Dutch Auction Notes will be the lowest single bid premium (the amount by which bid price exceeds the Base Price) at which QVC will be able to purchase Dutch Auction Notes in an aggregate principal amount equal to the Dutch Tender Cap.
com, estimates that if his company had used the traditional IPO method, the investment bankers would have priced its stock at between $10 and $11; via the Dutch auction method, the company's clearing price was $13.
Some companies choose to integrate the Dutch auction into an overall repurchase plan.
The Dutch Auction Offer will expire at 12:00 Midnight EDT on June 21, 2010, unless extended.
The Late Tender Offer Consideration for the Dutch Auction Notes is equal to the applicable Full Tender Offer Consideration.
1) The applicable spread to be used in determining the consideration that may be payable in respect of debt securities subject to the Dutch Auction Offer will equal the indicated base spread minus the clearing premium determined pursuant to the Dutch auction procedure described herein.
increase of the Dutch Auction Tender Cap (as defined below), including by allowing the Issuers to purchase additional Dutch Auction Notes at a bid price equal to the Clearing Premium, resulting in a total cash expenditure of not more than $175,000,000,
In the Dutch Auction Offer, the "Full Tender Offer Consideration" payable for each $1,000 principal amount of each series of Dutch Auction Notes will be equal to the minimum acceptable bid price plus the clearing premium, in each case, applicable to such series, with the applicable clearing premium to be determined pursuant to a modified "Dutch Auction" as described below.
The Dutch Auction Offer Total Consideration for each series per each $1,000 principal amount of notes validly tendered and accepted for payment is based on the reference yield plus a base spread specified for the series minus a premium that is not less than one basis point or greater than 15 basis points, as determined by the modified "Dutch Auction" procedure described in the Offer to Purchase.
Holders of Notes that are validly tendered on or before the Early Tender Deadline (as defined below), not validly withdrawn on or before the Withdrawal Deadline (as defined below) and accepted for purchase, will receive the Any and All Total Consideration or Dutch Auction Total Consideration, as applicable, which in each case includes the early tender payment for each series of Notes set forth in the table above (the "Early Tender Payment").
The principal amount of debt to be purchased in the Dutch Auction Offer will be equal to the difference between $500 million and the principal amount of debt purchased through the Any and All Offer (the "Tender Cap").
Sallie Mae also announced today that it will increase the Dutch Auction Cap to $292,661,000 to accept an additional $65,088,000 principal amount of Dutch Auction Securities such that any holder tendering at or below the clearing premium (as defined in the Offer to Purchase) will not be subject to proration.