Reverse Dutch Auctions

In a reverse Dutch auction, the auctioneer is the purchasing issuer rather than the seller

October 13, 2023

Welcome to the forty-fifth Pari Passu newsletter.

Today, we are going to have a short lesson on a technical concept that is not frequently mentioned: reverse dutch auctions.

Reverse Dutch Auctions

In a typical Dutch auction, participants bid to buy assets, and the seller gets rid of them at the best possible price that will allow it to sell all its wares. In a reverse Dutch auction, the auctioneer is the purchasing issuer rather than the seller. In the latter, the seller seeks to purchase or repurchase a specific amount of goods or assets at the lowest possible price. Sellers compete by submitting bids indicating the minimum price at which they are willing to sell, and the price typically decreases during the auction. The lowest bid determines the price, allowing the seller to achieve its desired outcome.

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