Blue Stone Builders recently offered to sell 45,000 newly issued shares of stock to the public. The underwriters charged a fee of 8.2 percent and paid Blue Stone Builders the uniform auction price for each of those shares. Which one of the following terms best describes this underwriting?

Question

Quizplus · Accepted Answer

The use of a uniform auction price suggests that this underwriting is a Dutch auction, which is a type of auction in which the price starts high and is gradually lowered until it reaches a price at which all of the offered shares can be sold. The underwriters then purchase the shares at that price and resell them to the public. The 8.2% fee paid by the underwriters is typical for a Dutch auction.

Blue Stone Builders Recently Offered to Sell 45,000 Newly Issued