Summarise the four main IPO listing mechanisms

Expert Solution

The four main IPO listing mechanisms are as follows:-

1.Single Price Auctions:- In Single Price Auction,all winning bidders pay the lowest price regardless of the prices they bid.It is a uniform type of auctioning of an IPO where there is an uniform price to be paid by each bidder.

2.Dutch Auction -In Dutch Auction, Winning bidders pay the amount they bid.It is a method of auction in which price is reduced untill a buyer is found. It is one of the oldest methods.

3 .Fixed Price Offerings:- Under a fixed price Offering,a certain number of shares are offered to retail investors at a preset price,which is generally identical to the price offered to institutional investors.Any interested investors indicates to his banks the number of shares he wishes to purchase at that price.This mechanism is rarely used nowadays.

4.Book Building :- It is the process where by the bank marketing the IPO gets to know the price investors intend to offer and the volume of the security they are interested in.Book Building mechanism allows the issuer company to make a public issue through the process of price discovery through twin factors of demand and supply rather than through a price that is fixed before .Nowadays, almost all the IPOs use this process to list.

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