French auction
A French auction (Offre à Prix Minimal, formerly Mise en Vente) is a multiple-price auction used for pricing initial public offerings.
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In this offering, the firm announces a minimum (reserve) price. Investors place sealed bids for quantity and price. When the bids are in, the firm negotiates a minimum and maximum price with the market regulator (the Société des Bourses Françaises, or SBF).
Any bid above the maximum price is eliminated as a virtual market order. The bidders who bid between the minimum and maximum price are awarded shares on a pro rata basis, each paying the minimum price.
If demand for the stock is too high, then the IPO may be changed to fixed-price offering.
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