Auction

AAA

DEFINITION of 'Auction'

A system where potential buyers place competitive bids on assets and services. The asset or service in question will sell to the party that places the highest bid. In most cases, sellers will pay a listing fee to the auctioneer, regardless of whether the item actually sells for the desired price.

INVESTOPEDIA EXPLAINS 'Auction'

For example, Google used a modified form of auctioning called the dutch auction when it issued its IPO. In this form of auction, prospective buyers submitted bids that included the number of shares desired and what the bidder was willing to pay for them. After the auction ended, the underwriters sorted through bids in order to determine the minimum priced bid they would accept from buyers. The IPO was priced at $85.

The internet has increased the amount of exposure that auctions now have, and bidders no longer have to be physically present to participate. Online marketplaces such as eBay connect buyers and sellers worldwide by allowing individuals to submit their bids (or list their products) online and send payment electronically.

RELATED TERMS
  1. Dealer Market

    A financial market mechanism wherein multiple dealers post prices ...
  2. Bidding War

    A situation where two or more buyers are so interested in an ...
  3. Sheriff's Sales

    A term used to refer to distressed public property auctions. ...
  4. Reverse Auction

    A type of auction in which sellers bid for the prices at which ...
  5. Dutch Auction

    1. A public offering auction structure in which the price of ...
  6. Auction Rate

    The interest rate that will be paid on a specific security as ...
Related Articles
  1. Stock Basics Tutorial
    Investing Basics

    Stock Basics Tutorial

  2. Getting To Know The Stock Exchanges
    Options & Futures

    Getting To Know The Stock Exchanges

  3. Auction Rate Securities: Bidding On ...
    Bonds & Fixed Income

    Auction Rate Securities: Bidding On ...

  4. What PayPal’s Split From EBay Means ...
    Investing News

    What PayPal’s Split From EBay Means ...

comments powered by Disqus
Hot Definitions
  1. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  2. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  3. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  4. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  5. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
  6. Earnings Before Interest After Taxes - EBIAT

    A financial measure that is an indicator of a company's operating performance. EBIAT, which is equivalent to after-tax EBIT ...
Trading Center