A French auction (''Offre à Prix Minimal'', formerly ''Mise en Vente'') is a multiple-price
auction
An auction is usually a process of buying and selling goods or services by offering them up for bids, taking bids, and then selling the item to the highest bidder or buying the item from the lowest bidder. Some exceptions to this definition ex ...
used for pricing
initial public offerings
An initial public offering (IPO) or stock launch is a public offering in which shares of a company are sold to institutional investors and usually also to retail (individual) investors. An IPO is typically underwritten by one or more investment ...
.
In this offering, the firm announces a
minimum (reserve) price. Investors place sealed bids for quantity and price. When the bids are in, the firm negotiates a minimum and maximum price with the market regulator (the ''
Société des Bourses Françaises'', or ''SBF'').
Any bid above the maximum price is eliminated as a virtual
market order
An order is an instruction to buy or sell on a trading venue such as a stock market, bond market, commodity market, financial derivative market or cryptocurrency exchange. These instructions can be simple or complicated, and can be sent to either a ...
. The bidders who bid between the minimum and maximum price are awarded shares on a ''pro rata'' basis, each paying the minimum price.
If demand for the stock is too high, then the IPO may be changed to fixed-price offering.
See also
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Book building
Book building is a systematic process of generating, capturing, and recording investor demand for shares. Usually, the issuer appoints a major investment bank to act as a major securities underwriter or bookrunner.
Book building is an alternativ ...
References
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Types of auction
Corporate finance
Stock market
Economy of France
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