Advantages of book building process

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advantages of book building process

Book Building Definition

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Capital Market & Securities Laws - Book Building Process - Law Lectures

Book building

Book building is the process by which an underwriter attempts to determine the price at which an initial public offering IPO will be offered. An underwriter, normally an investment bank, builds a book by inviting institutional investors fund managers et al. Book building has surpassed the 'fixed pricing' method, where the price is set prior to investor participation, to become the de facto mechanism by which companies price their IPOs. The process of price discovery involves generating and recording investor demand for shares before arriving at an issue price that will satisfy both the company offering the IPO and the market. It is highly recommended by all the major stock exchanges as the most efficient way to price securities.

Book building process helps investment bankers to have long term relation with institutional investors, as institutional investors are benefited with the allocation.
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B. COM## 2nd semester ## book building ##

Book building is a systematic process of generating, capturing, and recording investor demand for shares. Book building is an alternative method of making a public issue in which applications are accepted from large buyers such as financial institutions, corporations or high net-worth individuals, almost on firm allotment basis, instead of asking them to apply in public offer. Book building is a relatively new option for issues of securities, the first guidelines of which were issued on October 12, and have been revised from time to time since. Book building is a method of issuing shares based on a floor price which is indicated before the opening of the bidding process. The "book" is the off-market collation of investor demand by the bookrunner and is confidential to the bookrunner, issuer, and underwriter.

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In this article we will discuss about:- 1. Meaning of Book Building 2. Benefits of Book Building 3. Limitations of Book Building. Book building is a process of price discovery. Book building is a process by which the issuer company before filing of the prospectus, builds-up and ascertains the demand for the securities being issued and assesses the price at which such securities may be issued and ultimately determines the quantum of securities to be issued.

1 COMMENTS

  1. Juanelo R. says:

    Under book building process, the issuing company is required to tie up the issue amount by way of private placement. The issue price is not priced in advance.

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