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The modest 18% increase is likely due to the fact that demand for Google's shares increased since they held the dutch auction. Compare this to Netscape which ju
by biot 11y ago
The modest 18% increase is likely due to the fact that demand for Google's shares increased since they held the dutch auction. Compare this to Netscape which jumped well over 200% on its first day.
- bluedevil2k 11y agoThe 18% increase was a result of the auction designs's flaws. Buyers of course have a demand curve but for this auction they were required to pick a single demand point. So, googles IPO price was $85. If I was a big buyer who actually bid 100,000 shares at $120 for the auction, I would have received my 100,000 shares at $85. But my demand is a curve - I would probably be willing to buy 125,000 shares at $100 or 175,000 shares at $85. So, the price increase on the first day was more due to bidders filling their demand at the IPO price. EDIT: here's a link to a more detailed explanation, also linked elsewhere on this page - http://optimalauctions.com/designing-a-better-google-ipo-auction.jsp http://optimalauctions.com/designing-a-better-google-ipo-auc...