Maloney, Inc. has decided to sell 2,500 shares of stock. The bids received are a

Question

Maloney, Inc. has decided to sell 2,500 shares of stock. The bids received are as follows: Bidder A, quantity 500 price/share $23; Bidder B quantity 800 price/share; Bidder C quantity 1,000 price/share $21; Bidder D quantity 1,500 price/share $20; Bidder E quatnity 2,500 price/share $19. a If Maloney, Inc with the 2,500 shares via a Dutch auction how much equity capital is raised? b. If Maloney, Inc sells the 2,500 shares via a discriminatory auction, how much equity capital is raised? c. Explain "winner's curse" when Maloney, Inc sells the shares via discriminatory auction.

Explanation / Answer

1. the amount going to be raised is=

A 500 shares @ 23 per share= $11,500

B 800 shares @ 22 per share=$17,600

C 1000 shares @21 par share= $21,000

D 1500 shares @20 per share=$400 (only 200 shares availble to sell at 20 per share)

the total capital raised is $50,500

the shares shold be allocate on the above base only, that is price driven order, the investor who is ready to pay high, he has to give first priority and the same should be follow.

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