DT Metals is offering 700 shares in a Dutch auction IPO. The following bids have been received:
$$\begin{array} { c c c }
\text { Bidder } & \text { Ouantity } & \text { Price } \
\text { A } & 100 & \$ 24 \
\text { B } & 200 & 22 \
\text { C } & 200 & 22 \
\text { D } & 300 & 21 \
\text { E } & 600 & 20
\end{array}$$
What will the gross proceeds be for this offering?

Question

DT Metals is offering 700 shares in a Dutch auction IPO. The following bids have been received:
$$\begin{array} { c c c } 
\text { Bidder } & \text { Ouantity } & \text { Price } \
\text { A } & 100 & \$ 24 \
\text { B } & 200 & 22 \
\text { C } & 200 & 22 \
\text { D } & 300 & 21 \
\text { E } & 600 & 20
\end{array}$$
What will the gross proceeds be for this offering?

Quizplus · Accepted Answer

In a Dutch auction, the price paid is the lowest price that allows all shares to be sold. Here, to sell all 700 shares, the price must be at least $20 (the bid from E who wants 600 shares, and the next highest bids that can cover the remaining 100 shares are at $24 from A). Thus, all 700 shares are sold at $20 each, totaling $14,000 in gross proceeds.

DT Metals Is Offering 700 Shares in a Dutch Auction