OpenIPO
Encyclopedia
OpenIPO is an innovative auction process pioneered by the investment bank WR Hambrecht + Co
for distributing stock in an initial public offering
to individuals and institutions through an efficient and equitable process. It is a modified Dutch auction
process which allows shares of an initial public offering to be allocated in an impartial way. All successful bidders pay the same price per share.
Based on an auction system designed by Nobel Prize
-winning economist William Vickrey
, the OpenIPO auction uses a mathematical model to treat all qualifying bids in an even-handed and impartial way. It is similar to the model used to auction Treasury bills, notes, and bonds. Just like in a typical auction, the highest bidders win in an OpenIPO auction but there are important differences. In the OpenIPO auction, the entire auction is private, and winning bidders all pay the same price per share—the public offering price.
WR Hambrecht + Co has used OpenIPO to take a number of companies public including Morningstar
, Interactive Brokers Group, Overstock.com
, Ravenswood Winery, Clean Energy Fuels, and, most notably, functioned as co-manager to take Google
public in 2004, using the Dutch auction system. Many traditional investment banks have balked at the idea of using an auction process, such as OpenIPO to engage in public securities offerings as this new method allows for equal access to the allocation of shares and eliminates the “behind the scenes” dealings of shares and favorable treatment often found in conventional IPOs. Despite other banks’ resistance to using this method, however, OpenIPO has become more popular and has been used for over 20 public offerings.
WR Hambrecht + Co
WR Hambrecht + Co. is a full service investment bank with headquarters in San Francisco and offices in New York, Boston, Philadelphia, and Tokyo. It specializes in using its unique auction process called OpenIPO to compete with the traditional methods of larger and more established banks. Recently,...
for distributing stock in an initial public offering
Initial public offering
An initial public offering or stock market launch, is the first sale of stock by a private company to the public. It can be used by either small or large companies to raise expansion capital and become publicly traded enterprises...
to individuals and institutions through an efficient and equitable process. It is a modified Dutch auction
Dutch auction
A Dutch auction is a type of auction where the auctioneer begins with a high asking price which is lowered until some participant is willing to accept the auctioneer's price, or a predetermined reserve price is reached. The winning participant pays the last announced price...
process which allows shares of an initial public offering to be allocated in an impartial way. All successful bidders pay the same price per share.
Based on an auction system designed by Nobel Prize
Nobel Prize
The Nobel Prizes are annual international awards bestowed by Scandinavian committees in recognition of cultural and scientific advances. The will of the Swedish chemist Alfred Nobel, the inventor of dynamite, established the prizes in 1895...
-winning economist William Vickrey
William Vickrey
William Spencer Vickrey was a Canadian professor of economics and Nobel Laureate. Vickrey was awarded the Nobel Memorial Prize in Economics with James Mirrlees for their research into the economic theory of incentives under asymmetric information...
, the OpenIPO auction uses a mathematical model to treat all qualifying bids in an even-handed and impartial way. It is similar to the model used to auction Treasury bills, notes, and bonds. Just like in a typical auction, the highest bidders win in an OpenIPO auction but there are important differences. In the OpenIPO auction, the entire auction is private, and winning bidders all pay the same price per share—the public offering price.
WR Hambrecht + Co has used OpenIPO to take a number of companies public including Morningstar
Morningstar, Inc.
Morningstar, Inc. is an independent investment research company based in Chicago, Illinois, USA.-Businesses:Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of products and services for...
, Interactive Brokers Group, Overstock.com
Overstock.com
Overstock.com , also known by its shortcut, O.co, is an online retailer headquartered in Cottonwood Heights, Utah, near Salt Lake City. Founded in 1997 by Robert Brazell, under the name D2: Discounts Direct, it was a pioneering online seller of surplus merchandise which, upon its failure in 1999,...
, Ravenswood Winery, Clean Energy Fuels, and, most notably, functioned as co-manager to take Google
Google
Google Inc. is an American multinational public corporation invested in Internet search, cloud computing, and advertising technologies. Google hosts and develops a number of Internet-based services and products, and generates profit primarily from advertising through its AdWords program...
public in 2004, using the Dutch auction system. Many traditional investment banks have balked at the idea of using an auction process, such as OpenIPO to engage in public securities offerings as this new method allows for equal access to the allocation of shares and eliminates the “behind the scenes” dealings of shares and favorable treatment often found in conventional IPOs. Despite other banks’ resistance to using this method, however, OpenIPO has become more popular and has been used for over 20 public offerings.