What is Book Building?

book building capital issuance process used in initial public offer (ipo) aids price , demand discovery. process used marketing public offer of equity shares of company. mechanism where, during period book ipo open, bids collected investors @ various prices, above or equal floor price. process aims @ tapping both wholesale , retail investors. offer/issue price determined after bid closing date based on evaluation criteria.

process:


issuer planning ipo nominates lead merchant banker 'book runner'.
issuer specifies number of securities issued , price band orders.
issuer appoints syndicate members whom orders can placed investors.
investors place order syndicate member inputs orders 'electronic book'. process called 'bidding' , similar open auction.
book should remain open minimum of 5 days.
bids cannot entered less floor price.
bids can revised bidder before issue closes.
on close of book building period 'book runner evaluates bids on basis of evaluation criteria may include -
price aggression
investor quality
earliness of bids, etc.
book runner , company conclude final price @ willing issue stock , allocation of securities.
generally, number of shares fixed, issue size gets frozen based on price per share discovered through book building process.
allocation of securities made successful bidders.
book building concept , represents capital market in process of maturing.

the term book building consurned stock exchange.

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