Online Auction Planned for Secondary Offerings
Wit SoundView, the investment banking unit of Wit Capital Group Inc., and ITG Inc. said Thursday that they would create an online auction system for secondary and follow-on stock offerings, aimed at both institutional and individual investors.
Wit SoundView and ITG, which provides share trading services, said they formed a joint venture to launch the offering system, called Vostock.
Vostock will use the Internet to distribute materials about share offerings and would enable issuers and institutional and individual investors to come together online, real-time, to place orders for stock offerings.
The companies also hope to license the auction technology so other stock underwriters could use it, executives told a conference call.
“Vostock provides issuers with new flexibility and greater control over how and when they tap the capital markets,” said Mark Loehr, a Wit SoundView executive and main architect of the Vostock system.
Under the traditional process of selling stock, the issuer files a registration statement with regulators, then management visits with institutional investors in a “road show” and a sales force books indications of interest for the stock. Lastly, a syndicate team determines an offering price, Loehr said.
A Vostock online auction would typically last about 90 minutes and occur after the market close. Issuers, institutions and individual investors could watch stock orders being entered into the book in real time, Wit Capital said.
The corporate issuer first would register the share offering with regulators, but its management would hold a much shorter road show, lasting about three days, and then set a day for the auction, Loehr said.
Vostock would alert individual investors via e-mail and a sales force would call the institutions. For an hour, investors could come to the Web site to review the management presentation, and the auction would open at 5 p.m. with investors entering bids for shares into an online book.
“We’re trying to simplify that process and cut the time to market,” Loehr said.
