Auction System and Method for Pricing and Allocation During Capital Formation

• US 20100017344A1
• Filed: 08/13/2009
• Published: 01/21/2010
• Est. Priority Date: 06/15/1999
• Status: Active Grant

• Current Assignee: WR Hambrecht + Co. LLC
• Original Assignee: WR Hambrecht + Co. LLC
• Inventors: Ocheret, Charles, Katz, Alan, Hambrecht, William R., Regan, Matt, Hayes, Jordan, Hansson, Othar
• Granted Patent: US 8,117,112 B2
• Time in Patent Office: Days
• US Class Current: 705/36.R
• CPC Class Codes: G06Q 30/08 Auctions
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

A computer implemented system and method determines price and allocation of equity shares. Information about an offering to accept bids for equity shares is provided to qualified potential purchasers and non-qualified potential purchasers. Bids from potential purchasers for equity shares are received through a communication network. Bids are accepted and offered to be accepted only from qualified potential purchasers. A non-qualified potential purchaser submits a bid through a qualified potential purchaser. A clearing price for the offered shares is determined based on the received bids.

Claims

1. A computer-implemented method for, determining price and allocation of equity shares in an offering comprising:

providing information about an offering to accept bids for equity shares to at least one qualified potential purchaser and at least one non-qualified potential purchaser;

offering to accept bids only from one or more qualified potential purchasers via a communication network for equity shares, wherein at least one non-qualified potential purchaser submits a bid through a qualified potential purchaser;

receiving bids via a communication network only from qualified potential purchasers of the offered shares; and

determining a clearing price for the offered shares based upon the received bids.

2. The method of claim 1 wherein one of the one or more qualified potential purchasers comprises a financial institution, an on-line brokerage firm, an investment advisor, a certified financial planner, a certified financial advisor, or an insurance company.

3. The method of claim 1 wherein the at least one non-qualified potential purchaser comprises an individual investor who is not a qualified potential purchaser.

4. The method of claim 1, wherein:

at least one of the one or more qualified potential purchasers comprises a qualified institutional investor, and

at least one other of the one or more qualified potential purchasers comprises a qualified non-institutional investor, the method further comprising;

permitting extension of credit for a bid only to qualified institutional investors; and

requiring qualified non-institutional investors to have funds in an account sufficient to cover a bid.

5. The method of claim 1 wherein information about the offering comprises one or more of a prospectus, a description of the offering, auction guidelines and rules, instructions on how to open a brokerage account, marketing materials associated with the offering, a registration form, or a disclaimer.

6. The method of claim 1 wherein at least one non-qualified potential purchaser submits a bid through a qualified potential purchaser that is an on-line brokerage firm.

7. The method of claim 1 wherein determining the clearing price for the offered shares based upon received bids is based on a prescribed amount of capital to be raised.

8. The method of claim 1 wherein determining the clearing price for the offered shares based upon received bids is based on a prescribed number of shares being offered.

9. The method of claim 8 wherein determining the clearing price for the offered shares further comprises:

arranging the received bids in descending order based on price;

summing the aggregate quantity of shared bid for starting with the bid with the highest price and descending downward in price; and

determining at which price the aggregate quantity of shares bid for is equal to or greater than the prescribed number of shares being offered.

10. The method of claim 1 wherein offering to accept bids further comprises setting an initial price range and offering to accept bids only within the initial price range.

11. The method of claim 1 wherein offering to accept bids further comprises setting a minimum price and offering to accept bids only equal to or above the minimum price.

12. The method of claim 1 wherein offering to accept bids and receiving bids are performed through an online interface or an Internet interface.

13. The method of claim 1 wherein one of the bids is a binding contract.

14. The method of claim 1 wherein one of the bids is an indication of interest and is not a binding contract.

15. The method of claim 1 wherein one of the bids is received from a qualified potential purchaser and is treated as a good-till-cancelled limit order.

16. The method of claim 1 further comprising selling the offered shares at a public offering price lower than the clearing price.

17. A computer system for determining the price and allocation of equity securities of a company, the system comprising:

an order management component for;

providing information about an offering to accept bids for equity shares to at least one qualified potential purchaser and at least one non-qualified potential purchaser,

offering to accept bids only from one or more qualified potential purchasers via a communication network, wherein at least one non-qualified potential purchase submits a bid through a qualified potential purchaser, and

receiving via a communication network bids only from qualified potential purchasers of offered equity securities;

an auctioneer component for determining a clearing price for offered shares based on the received bids, allocating to prospective investors based on the clearing price; and

a data storage component for storing information associated with bids.

18. The system of claim 17 wherein the order management component receives at least one bid from a qualified purchaser that is a broker dealer.

19. The system of claim 18 wherein the at least one bid received from the broker deal dealer is received from an order management system at the broker dealer.

20. The system of claim 17 wherein the data storage component stores information on users and user security information relating to user access rights to the system.

21. A method for auctioning securities by auction offeror comprising:

receiving a plurality of bids for an offered amount of securities, each bid including a bid price, a desired amount of securities, and an associated bid time indicting a time that the bid was received by the system;

after a predetermined auction end time, establishing a final price for the securities based upon the received bids;

allocating the desired number of securities to each bid having a bid price more favorable for the auction offeror than the final price; and

allocating the desired number of securities to each bid having a bid price at the final price chronologically in bid time order until the offered number of securities has been allocated.

22. A method according to claim 21, further comprising:

for a last bid to have securities allocated, if a remaining amount of unallocated securities is less than the desired amount of securities for the last bid, allocating the remaining amount of unallocated securities to the last bid.

23. A method according to claim 21, further comprising:

during allocation of securities at the final price, if a remaining amount of unallocated securities is less than a total desired amount of securities for a plurality of bids having the same bid time, allocating the remaining amount of unallocated securities on a pro rata basis to the plurality of bids having the same bid time.

24. A method according to claim 21, wherein the securities include a debt offering and the bid price represents an offer to buy the debt offering.

25. A method according to claim 21, wherein the securities include an equities offering and the bid price represents an offer to buy the equities offering.