Online Trading Blog

Dutch auctions IPO is a newer method of IPO (Initial Public Offer) bidding, which is proposed to offer most price to stock for releasing firms and democracy in IPO bidding. The bidding process of Dutch IPO is just opposite of traditional IPO. In traditional IPO the bidding start from a low fixed price set by firms using data from market researches and evaluators. In Dutch IPO the bidding starts from high fixed/no-fixed price and bidders place bid of low prices.

Dutch IPO auctions takes comparatively more time than traditional IPO, and is most suitable for internet/online IPO auctions. Interested bidders continuously places bids of lesser/greater amounts per share for number of shares they wanted and at the end of the option the shares are disbursed according to the last bidding price (lowest bidding price) required for fill the share quota. In short, in Dutch auctions IPO all users placing high amount bids (greater or same as lowest bid to fill the quota) get shares for lowest bid price to full the quota.

Many large companies now choose Dutch IPO options to get most money from IPOs. Dutch model is most suitable for growing and technology companies. Dutch IPO also minimizes the profits of middlemen, who buys stocks cheaply from traditional IPOs and sells high in one or two day time. But traditional model favors the continuous increase of stock price after the IPO but in Dutch IPO this scenario is limited.

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