Info 1: auction market definition
Info 2: how auction market works
Info 3: secondary stock auction market vs primary stock auction market
Info 4: example of the auction market
Opening information:
Auction market sentence breaks into two words auction and market, auction means the matter of selling the goods or services at the highest bid, and a market means the place of buying and selling goods and products.
An auction market is a place of buying and selling a good or service at the highest bid. So now let’s have a look at what is an auction market.
How the auction market works in the stock market among all the corporations and stock Investors, and what is the difference between the secondary stock auction market and primary stock auction market, finally one clear example of the auction market.
Info 1: auction market definition
There was a 55-year-old man named Edward. He ran a private company called Sharmo. For some reason, Edward declared Sharmo a public company after a period of time. Sharamo’s shares are now owned by millions of people, but Edward is still the CEO of Sharamo.
Sharmo company owns one of the oldest and most popular home parts. But Sharmo company did not know the price for that antique celebrity home. So Sharmo sought an auction market to sell the popular home part it owned.
Therefore, an auction market has set a certain price for an old popular house part owned by Sharamo and released it to the public at auction in the primary market. The auction market has set a price of 3 million dollars for that old popular house part.
Xander first started bidding on the market for $ 4 million. It was then auctioned off by several people and eventually sold by Hayden for $ 25 million, selling an old popular home part-owned by the Sharmo company.
The auction house in the primary market is called the auction market for the sale of antique popular home parts owned by Sharamo Company.
So let’s dive into how the auction market works in the stock market among all the Corporate Industries.
Info 2: how the auction market works
An auction market doesn’t represent any specific object of the market, instead, it’s a place that demonstrates a certain bid and asks works of activities for one or more items.
Where such items would be considered as shares in the stock market, whenever any of the public shares were issued industry couldn’t able to determine the shares for any amount of fixed price to be sold at the initial stage.
They normally perform the auction market way with an Investment bank to determine one average price for the issuing shares using the initial Investors in the primary market.
Primary markets are called initial public offering markets after such market shares are listed in the stock exchange industries.
When one business easily values its assets and liabilities based on the information it holds physically, it would able to determine each share price easily.
At the same time, whenever any of the public businesses didn’t have enough physical material because their business value was based on technology, where such a company couldn’t easily be determined by their business shares.
To decide the share price, such an organization issued the shares with the Investment bank for the stock investor to bet or bid their wished price for such shares.
Therefore the stock Investor bid would be taken until the issue of shares in closing. among all the bids the average bid amount is the one which is determined as the price of such equity share.
Where this biding period process is what is called a book building process of one company.
If the bid amount is less than the floor price or initial issue price and very high above the Determine price then such bid amount would be rejected or refunded amount to their Investment accounts.
Moreover, this same auction market is what plays in the secondary market called stock exchange bidding, in exchange industries as long as bidding happens directly or through stock brokers it continuously increases the demand for such shares and makes the price very high.
And decrease when the majority of the stock Investors won’t bid and start to sell their holding shares.
Most people confuse the secondary stock auction market and primary stock auction market, so let’s jump into the key difference in it anyway.
Info 3: secondary stock auction market vs primary stock auction market
The difference between the secondary stock auction market and the primary auction market are, secondary stock auction market is not controllable by any kind of industry, and the price of the shares is determined by the highest bid price in the public market based on the demand and supply among the Investors.
On the other side, the primary auction market is the one which won’t determine the highest or lowest bid in the book building process of the primary market, instead, the industry concludes with an average bid price on such market.
To make you more clear about the auction market, let’s look at one clear example below.
Info 4: example of auction market.
Say you had made two kinds of bid, one is you had bought the shares of stock A at 24 dollar bid price in the stock exchange industry list.
And on the other hand, you had bid a lower bid than the highest bid of other Investors in the book building process of initial public offering in the issuance market.
Here the bid at the stock exchange on the highest bid at 24 dollars is the secondary auction market and the bid at the book building process
Which is lower than the highest bid are considered to be the primary auction market.