OpenIPO Auction: How it Works

What is the OpenIPO ^®auction?
Core to OpenIPO is an auction process that allows all interested buyers to participate in your IPO and ensures fair allocation of stock.  Based on an auction system designed by Nobel Prize-winning economist William Vickrey, our OpenIPO auction uses a mathematical model to treat all qualifying bids in an even-handed and impartial way.

Just like a typical auction, the highest bidders win in an OpenIPO auction. But there are important differences. In our OpenIPO auction, the entire auction is private, and winning bidders all pay the same price per share – the public offering price.

We feel that the OpenIPO process is a disruptive innovation that offers several key advantages to issuers and purchasers of their securities, including:

Achieving true market pricing, not leaving money on the table.

Widest possible distribution, finding the institutions and retail clients who really want to own the stock for the long term.

Making the buyers and the sellers in an IPO look smart, using the market to set the price and the auction to reward the bidders.

How does the OpenIPO auction work?
An OpenIPO auction is typically open for bids for 2-3 weeks prior to the effective date of the offering. Once the bidding concludes, the OpenIPO auction assembles the bids and, working from highest to lowest, finds the first bid price that will sell all the offering’s shares. This is the “clearing price” and will be the maximum price at which the issuing company will offer its shares.

The issuing company and the underwriters then decide the price at which the company will offer the shares, taking a number of economic and business factors into account in addition to the clearing price. The company may choose to sell shares at the clearing price, or it may offer the shares at a lower offering price.

If the number of shares bid for exceeds the number of shares in the offering, WR Hambrecht + Co allocates on a pro-rata basis. Under these circumstances, allocations will be rounded to multiples of 100 or 1,000 shares, depending on the size of the bid.

Click here to view how pro-rata allocation works. For a complete description, refer to the plan of distribution in the applicable prospectus.