Homework 3 - 1) Overall, the costs for a Dutch auction IPO...

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1) Overall, the costs for a Dutch auction IPO are significantly lower than the costs of a regular IPO. One reason is that there isn’t much marketing done with an auction IPO. Another reason there are lower costs is that an underwriter is not needed to price the new securities since the auction process does this and the overall underwriting fee is less. There are both pros and cons for both an auction IPO and traditional IPO. For instance, an advantage of the auction based IPO is that the stock price is more likely to be closer to the market value as apposed a traditional IPO in which the stock price is discounted. When the price is closer to the market value on the first day of trading, this means that the company retains the money instead of investors. This can also have a downside since it increases the chance that the IPO will be overpriced and not raise as much capital as it should. Another advantage of a Dutch IPO is that more investors are given the opportunity to buy shares since an auction allows more people to participate. However, a
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Homework 3 - 1) Overall, the costs for a Dutch auction IPO...

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