| a method of auction consisting in the offer of a property at a price above the actual value and then at gradually reduced prices until a buyer is found. |
| Dutch auction n. An auction in which an item is initially offered at a high price that is progressively lowered until a bid is made and the item sold. |
Dutch Auction
An auction where the price on an item is lowered until it gets its first bid, and then the item is sold at that price.
Investopedia Commentary
The U.S. Treasury (and other countries) uses a Dutch auction when it sells securities.
See also: Auction Market
Dutch auction
Case Study Whittaker Corporation announced plans in 1986 to sell several of its business units and use the proceeds to repurchase a significant proportion of its own outstanding stock. The stock buyback was to occur through a process by which Whittaker's shareholders could submit offers for varying numbers of shares at various prices. A shareholder might submit an offer to sell 500 shares at $35; 500 shares at $34; and 500 shares at $33, for example. Depending on the number of available shares and the prices offered by the shareholders, Whittaker would then set a price at which it would purchase the stock. Thus, if Whittaker set a price of $34.75, the shareholder would sell 1,000 shares (those offered at $34.75 or less) at a price of $34.75 each. Whittaker undertook the Dutch auction to determine the lowest price at which it could buy back the desired number of shares. |