Archive of UserLand's first discussion group, started October 5, 1998.

Salon IPO--everyone's missing the point

Author:Dennis Peterson
Posted:6/24/1999; 9:18:28 AM
Topic:Salon IPO--everyone's missing the point
Msg #:7780
Prev/Next:7779 / 7781

News articles keep talking about Salon's lack of a big first-day runup as if that were a bad thing. In fact, the dutch auction is performing exactly as it was designed to.

The dutch auction has been mathematically shown to produce prices near the fair market price. The fact that the price doesn't move much immediately shows that it is doing just that. The big initial price moves are advantageous only to the insiders anyway--the average investor gets in later and tends to lose. The auction eliminates that insider advantage, which is also part of the point.

The stable market price is much less exciting to news writers, but makes the IPO accessible to the average Joe. The fact that this type of IPO is less costly to the company is a bonus.

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