WhiteGlove Health, Inc., which on September 16 filed Amendment No 9 to its Form S-1, would be the first issuer to use the “OpenIPO” distribution method since 2007. “OpenIPO” is WR Hambrecht + Co.’s trademarked name for an auction-based approach to the determination of public offering price and share allocation in which all investors, including company insiders, have an equal opportunity to receive an allocation of shares at the same price. The investment bank was an underwriter in the eleven auction method IPOs that have closed since 2005.
For issuers using "OpenIPO", the underwriters solicit bids from potential investors that specify both the price and the number of securities the bidder wishes to purchase. Prospective investors must open a brokerage account with one of the underwriters and deposit money into it. These funds back the bids made in the auction. The auction begins as soon as a preliminary prospectus is available and closes after the registration is declared effective. At any point within that window, bids can be canceled or modified and investors can make multiple bids at multiple prices.
At the close of the auction, the underwriters determine a “clearing price,” or the highest price at which all offered shares can be sold. Once a clearing price is set, the issuer and the underwriters establish the public offering price. The public offering price may be less than, but cannot exceed, the clearing price. All of an investor’s bids at or above the clearing price will be considered and cumulated at the close of the auction. The public offering price determines the allocation of shares to potential investors, with all valid bids submitted at or above the public offering price receiving a pro rata portion of the shares bid for. Each of an investor’s successful bids will be treated separately for purposes of allocation and rounding of lots to multiples of 100 or 1,000 shares.
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