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Monday, September 21, 2020

What is a Dutch auction and how does it work?

A Dutch auction is way of offering/selling of goods to the public. The seller offers the lot to the general public. The actual price of the whole set is determined after all offers have been received at the level at which all shares could be sold. The public or buyers are supposed to state how many items thye want and at what price do they want them. 

The following example would illustrate it.

Assume the seller is trying to sell  10,000 shares of Ford Motor Company (F).

Buyers submit their orders...

Merida -- 1,500 shares at $15.00  each

Peter Pan --- 2,500 shares at $14.25 each 

Pop - Eye -- 2,500 shares at $14.00 each

Donald Duck --3,500 shares at $13.90 each

Kim Possible -- 4,000 shares at $13.85 each

Ben Ten -- 3,000 shares at $13,77 each.

... ...

In this case, the 10,000 shares are sold to Merida, Peter Pan, Pop Eye and Donald Duck for $13.90.  The whole lot can be sold. 


 

 

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