Updating the reserve price in common value auctions style online dating tips
However, the price that each bidder pays is based on the lowest price of all the allotted bidders, or essentially the last successful bid. Treasury uses a Dutch auction to sell its securities.
Therefore, even if you bid 0 for your 1,000 shares, if the last successful bid is , you will only have to pay for your 1,000 shares. To help finance the country's debt, the US Treasury holds regular auctions to sell Treasury bills (T-bills), notes (T-notes), and bonds (T-bonds), collectively known as Treasuries.
The most prominent example of a Dutch Auction in recent times was Google's IPO in August 2004.
The company opted for this type of offering to prevent a "pop" in its prices on the first day of trading.
Suppose the Treasury seeks to raise million in two-year notes with a 5% coupon.
For example, an investor may place a bid for 100 shares at 0 while another investor offers for 500 shares.
Once all the bids are submitted, the allotted placement is assigned to the bidders from the highest bids down, until all of the allotted shares are assigned.
That figure jumped to 77% in 1999 and in the first half of 2000.
Google's initial estimate for its offering was 25.9 million between the 8 to 5 range.