The more opaque and less liquid an asset, the fewer the number of interested buyers for that asset. Thus the need for a new way to attract bidders to certain types of illiquid assets . . . the ManhattanAuction.
What is a ManhattanAuction?
A ManhattanAuction is a new auction format invented by SecondMarket that is specifically tailored to address the issues associated with less liquid assets. In a ManhattanAuction the seller sets aside a portion of the sale proceeds (participation award) that will be distributed to a predetermined number of bidders after the transaction settles. Thus investors are incentivized to do the work necessary to submit an informed bid on illiquid assets.
How many bidders are eligible for a participation award?
Prior to the auction, the seller determines the number of bidders that will receive the participation award -- top 3 bidders, top 5, top 10, or all bidders.
How much is the participation award?
Prior to the auction, the seller decides what percentage of the sale proceeds it will offer as the participation award, which can be as high or low as the seller wishes.
When is the participation award distributed?
The participation award is distributed upon the successful settlement of the transaction. A SecondMarket brokerage account is set up for each bidder, and the participation award is paid to each bidder once it completes its first asset purchase through SecondMarket.
As a seller, can I set a reserve price?
Yes, you can set a reserve price in all SecondMarket auction formats, including ManhattanAuctions. By setting a reserve price (the minimum price you will accept), you have the ability to sell your asset at a price you are happy with. (Bidders will know that there is a reserve price, but they will not know what the specific reserve price is.)
