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Google tried to be cheeky and go the auction way. It was wrought with problems. As far as I can tell, all tech IPOs following that went back the traditional wa

by acchow 9y ago

Google tried to be cheeky and go the auction way. It was wrought with problems. As far as I can tell, all tech IPOs following that went back the traditional way.

thanatropism 9y ago
> problems How can I learn more about this?
- pfarrell 9y ago
  Search "google dutch auction ipo"
- tristanj 9y ago
  http://www.cnbc.com/2014/08/19/es-took-off-but-the-auction-didnt.html http://www.cnbc.com/2014/08/19/es-took-off-but-the-auction-d...
  - jpatokal 9y ago
    Sorry, what problems are these? The article mentions that institutional investors were unhappy about not getting their usual 15% guaranteed bounce, but it seems to have worked pretty well for Google and general investors.
    - jiqiren 9y ago
      I don't think you read closely enough. On the low-end, banks were thinking $108 for the base price per share. As it was, the IPO ended up at $85/share because of it being a dutch-auction where most investors played it safe and did low bids. As soon as the IPO executed (at $85) it popped anyway to $100. So Google potentially lost out on $23/share (minus 7-8% cut from banks). https://www.quora.com/How-was-Googles-IPO-unique/answer/Yair-Livne https://www.quora.com/How-was-Googles-IPO-unique/answer/Yair...
      - Simon_says 9y ago
        "Play it safe" doesn't make sense in this context. Dutch auctions' purpose is to incentivize buyers to bid the highest price they're willing to pay.
        simonh 9y ago
        Except it doesn't do that. In an open auction if someone bids higher you know you won't get any shares unless you raise your bid. In a Dutch auction if you keep your bid low there's always a chance you will get your shares and at a good price. As actually happened in the Google case. Yes you're risking you might not get any shares, but bidding higher risks unnecessarily pushing the price higher for yourself and everyone else.
        Simon_says 9y ago
        Are you sure you know what a Dutch auction is? In your descriptions, you seem to be transposing open and Dutch auctions.
        philh 9y ago
        Note that the term "Dutch auction" is overloaded, but in this case the article specifies: > Often called a "Dutch" auction, this type of sale allows any investor—institution or individual—to put in a bid over the Web for a certain number of shares at a certain price without knowing what others are offering to pay. After the bidding, the highest price at which every available share can be sold becomes the price for all the shares—the IPO price. Google, along with early backers, was selling almost 20 million shares, and bids could be submitted for as few as five. This doesn't actually remove the incentive to underbid. You might be thinking of a Vickrey auction? That's an auction of one item, in which the high bidder pays the second-highest bid. (This is what I always think of when I hear "dutch auction".) There's an obvious generalization to auctioning multiple items; but the Google auction is not that generalization, and also that generalization apparently doesn't work. See https://en.wikipedia.org/wiki/Dutch_auction https://en.wikipedia.org/wiki/Dutch_auction and https://en.wikipedia.org/wiki/Vickrey_auction https://en.wikipedia.org/wiki/Vickrey_auction . Frustratingly, the Dutch auction page describes a "second-price auction" which is different from that described on the "second-price auction" page that it links to, which redirects to Vickrey auction. It's a whole mess.

by acchow 9y ago

Google tried to be cheeky and go the auction way. It was wrought with problems. As far as I can tell, all tech IPOs following that went back the traditional way.

thanatropism 9y ago

> problems How can I learn more about this?

pfarrell 9y ago
Search "google dutch auction ipo"
tristanj 9y ago
http://www.cnbc.com/2014/08/19/es-took-off-but-the-auction-didnt.html http://www.cnbc.com/2014/08/19/es-took-off-but-the-auction-d...
- jpatokal 9y ago
  Sorry, what problems are these? The article mentions that institutional investors were unhappy about not getting their usual 15% guaranteed bounce, but it seems to have worked pretty well for Google and general investors.
  - jiqiren 9y ago
    I don't think you read closely enough. On the low-end, banks were thinking $108 for the base price per share. As it was, the IPO ended up at $85/share because of it being a dutch-auction where most investors played it safe and did low bids. As soon as the IPO executed (at $85) it popped anyway to $100. So Google potentially lost out on $23/share (minus 7-8% cut from banks). https://www.quora.com/How-was-Googles-IPO-unique/answer/Yair-Livne https://www.quora.com/How-was-Googles-IPO-unique/answer/Yair...
    - Simon_says 9y ago
      "Play it safe" doesn't make sense in this context. Dutch auctions' purpose is to incentivize buyers to bid the highest price they're willing to pay.
      - simonh 9y ago
        Except it doesn't do that. In an open auction if someone bids higher you know you won't get any shares unless you raise your bid. In a Dutch auction if you keep your bid low there's always a chance you will get your shares and at a good price. As actually happened in the Google case. Yes you're risking you might not get any shares, but bidding higher risks unnecessarily pushing the price higher for yourself and everyone else.
        Simon_says 9y ago
        Are you sure you know what a Dutch auction is? In your descriptions, you seem to be transposing open and Dutch auctions.
        philh 9y ago
        Note that the term "Dutch auction" is overloaded, but in this case the article specifies: > Often called a "Dutch" auction, this type of sale allows any investor—institution or individual—to put in a bid over the Web for a certain number of shares at a certain price without knowing what others are offering to pay. After the bidding, the highest price at which every available share can be sold becomes the price for all the shares—the IPO price. Google, along with early backers, was selling almost 20 million shares, and bids could be submitted for as few as five. This doesn't actually remove the incentive to underbid. You might be thinking of a Vickrey auction? That's an auction of one item, in which the high bidder pays the second-highest bid. (This is what I always think of when I hear "dutch auction".) There's an obvious generalization to auctioning multiple items; but the Google auction is not that generalization, and also that generalization apparently doesn't work. See https://en.wikipedia.org/wiki/Dutch_auction https://en.wikipedia.org/wiki/Dutch_auction and https://en.wikipedia.org/wiki/Vickrey_auction https://en.wikipedia.org/wiki/Vickrey_auction . Frustratingly, the Dutch auction page describes a "second-price auction" which is different from that described on the "second-price auction" page that it links to, which redirects to Vickrey auction. It's a whole mess.