Data processing: financial – business practice – management – or co – Automated electrical financial or business practice or... – Finance
Reexamination Certificate
1999-07-06
2003-09-30
Millin, Vincent (Department: 3624)
Data processing: financial, business practice, management, or co
Automated electrical financial or business practice or...
Finance
C705S035000, C705S03600T, C705S037000
Reexamination Certificate
active
06629082
ABSTRACT:
SUMMARY OF THE INVENTION
In one aspect, the invention provides an auction system and method used in concert with an underwriting process. By re-thinking accepted underwriting practices, the new system and process levels the playing field for pricing and allocating equity securities. Unlike the traditional method of allowing entities such as investment bankers to negotiate the offering price, an auction system and process in accordance with the invention, employs a mathematical model that lets the market set a share price that is optimal for both the company and the purchasers of shares of stock in the company. The result is a price that eliminates traditional fixed discounts and better reflects what the market is truly willing to pay for the stock.
One embodiment of the invention provides a system and method for determining the final offering price and allocations of stock in a company. First, an underwriter sets an initial price range for the shares. Then, any investor (whether institutional or retail) who is interested in the offering can place a bid in the auction through an internet website. Once the auction is closed, the auction system calculates a fair market clearing priced based loosely on a mathematical model created by Nobel Prize-winning economist William Vickrey. In effect, a software-driven auction engine ranks bids from highest price to lowest price. Starting with the highest priced bid, the amount of shares requested accumulate. At the price where the cumulative amount of requested shares is equal to the amount of shares the company wishes to sell, the clearing price is set. Everyone who bids above the clearing price receives a full allocation. Those who bid at the clearing price receive a partial allocation, while those who bid below the clearing price receive no shares. The result: shares are allocated in a more evenhanded way at a price determined not by negotiation behind closed doors but by institutional and retail investors bidding on equal footing based on the actual per share price they are willing to pay.
REFERENCES:
patent: 2001/0034692 (2001-10-01), McRedmond
patent: WO 00/51047 (2000-08-01), None
U.S. Securities and Exchange Commission, Proposed Rule: Determining the Term “Qualified Purchaser” under the Securities Act of 1933.*
John M. Dalton, Editor, How the Stock Market Works, 1993, NYIF Corp., Second Edition, pp. 33-60.*
John Downes and John Elliot Goodman, Dictionary of Finance and Investment Terms, 1998, Fifth Edition, pp. 132, 243, 600, 275.*
Lee Epstein, Newcomers Guide to the Dutch Auction Process (Securities Auctions), Corporate Cashflow Magazine, v11, n3, p42(2), Mar. 1990.*
PopNet Float Shows up the Flaws, Financial News, Feb. 7, 2000.
Hambrecht William R.
Hansson Othar
Hayes Jordan
Katz Alan
Ocheret Charles
Fish & Richardson P.C.
Kyle Charles R.
Millin Vincent
W.R. Hambrecht & Co.
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