Business, Management and Accounting
8 years ago

IPO Auctions Could Reduce Underpricing but Hurt Issuers' Net Proceeds

Journal of Applied Corporate Finance
Bookbuidling, Auctions, and the Future of the IPO Process
William J. Wilhelm

Paper Summary

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The article discusses how IPOs are typically sold through bookbuilding in the U.S., but auctions may be a more efficient and fairer method. Bookbuilding involves getting interest from big investors and allocating shares based on that interest, while auctions allow all investors to bid. However, auctions may lead to less aggressive bidding from big investors, potentially reducing underpricing but also lowering proceeds for issuers.