Papers on "Are Auctions Worthwhile?" and similar term paper topics

Paper #092083 :: Are Auctions Worthwhile?
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This paper examines traditional IPOs vs. Google and Morningstar's Dutch auction.

Written in 2007; 861 words; 6 sources; MLA; $ 30.95

Paper Summary:

The paper discusses the traditional initial public offering (IPO) allocation processes and explains that the banks intentionally restrict investment participation, set a low price that will ensure a big short-term gain for their favored customers and charge high fees to the company going public. The paper looks at Google and Morningstar's alternative process of a Dutch auction and examines the risks involved. The paper notes that supporters of auctions claim that they help raise more capital for a company and are fairer for small investors. Yet, the paper shows that there is no evidence that efficient pricing results from an auction process. The paper shows how even in Google's auctions, large, favored investors and the insider club obtain an edge in the investment process. Further, the paper warns there may be additional adverse outcome risks from auctions.

From the Paper:

"There's no conclusive evidence to support the theory that auctions serve as efficient pricing mechanisms for IPOs. According to Hensel (2005), the increase between Google's offer price and its open price was much greater than the increase for IPO's using traditional allocation processes in 2004. The price rose by nearly eighteen percent its very first day. In contrast, eighty-three percent of the IPOs issued between January and November 2004 experienced less of a jump from the offer price to the open price than Google did. Furthermore, the Google share price continued to soar in the following months to a high of $216.80."

Tags: initial public offering capital public

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