RE: Re............8 Oct 2019 13:15
Price Not determined yet: Book building is the security price discovery process that involves generating and recording investor demand for shares during an initial public offering (IPO) or other issuance stages. The issuing company hires an investment bank to act as underwriter. The underwriter determines the price range the of the security and sends out the draft prospectus to multiple investors. The investors bid the number of shares that they are willing to buy, given the price range. The book is open for a fixed period of time, during which the bidder can revise the price offered. After a predetermined period of time, the book is closed and the aggregate demand for the issue can be evaluated so that a value is placed on the security. The final price chosen is simply the weighted average of all the bids that have been received by the investment banker.
With an accelerated bookbuild, the offer period is open for only one or two days and with little to no marketing. In other words, the time between pricing and issuance is 48 hours or less. A bookbuild that is accelerated is frequently implemented overnight, with the issuing company contacting a number of investment banks that can serve as underwriters on the evening prior to the intended placement. The issuer solicits bids in an auction-type process and awards the underwriting contract to the bank that commits to the highest back stop price. The underwriter submits the proposal with the price range to institutional investors. In effect, placement with investors happens overnight with the security pricing occurring most often within 24 to 48 hours.
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