Two or more people who really want to buy the same thing, shamelessly raising their offers. That's a bidding war.
This can happen in an auction setting. Imagine two people furiously waving their paddles in the air, trying to secure a rare painting or a discontinued bottle of wine. "Do I hear one million...a million...do I hear two million...five million...ten million!"
Bidding wars often break out in hot real estate markets as well.
In a corporate setting, a bidding war can break out for an acquisition. Two pharma giants get interested in a smaller drug developer who just figured out the next best cure for baldness. They keep upping their offer to shareholders, usually until one finally reaches the end of its financial rope.
A bidding war almost always ends with someone overpaying for the asset. It's marked by a break down in reason, with people getting more interested in "winning the bidding war" in the sense of eventually obtaining the asset than "winning the bidding war" in the sense of getting out of the situation in a better financial position than when they started.
Related or Semi-related Video
Finance: What is a hot issue?2 Views
Finance allah shmoop What is ah hot issue All right
Well it's one that has demanded more than it is
supplied One that is loved more than it is hated
One that is hot more thin it's gold Well the
most common hot issue in the press You read about
all the time Yeah It's an aipo that everybody wants
Why Well it's basically free money to the investors Price
talk has been ten to twelve dollars a share And
well then it looks like it's moved twelve to fifteen
and out price doc's fifteen to eighteen a share And
traders are mumbling that the first actual traded print will
be something like forty dollars a share So anyone who
buys at that eighteen dollars price or really any price
upto thirty thirty two thirty five something like that Well
they'll make a massive return for one day's work just
flipping their stock Tio you no longer term holders I
think about the real estate show where they flip houses
you know Well they have to do a whole lot
of work to flip a house on stocks are a
lot easier Well why do hot issues even happen Well
often banks purposely underprice i pose to quote pay the
street unquote for taking risk and buying that aipo handsomely
like they price it low Lots of people are going
to buy it have a low cost basis and remember
it fondly Well cos generally play along instead of selling
say thirty forty fifty percent of themselves to the public
in there i po well they only sell ten percent
and later on they'll sell more when the stock is
popped and traded and settled and has a buying public
and all the other good things that go with it
so and only a tiny amount of shares out there
trading even modest demand can drive prices to the sky
and this phenomenon happens Ah lot ebay snap facebook A
whole bunch of others essentially created hot issues by offering
very tiny fractions of ownership of themselves to the public
in there i po so that the enormous buyer interest
almost guarantees more demand than supply of the security being
sold and hot issues as you guess our great well 00:02:03.51 --> [endTime] until they're not
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