IPO Book Building Process Explained

Book building is among the three different mechanisms used to complete an initial public offering (IPO). It is when the investment bank collects information on how much investors want and what they are willing to pay for shares in an IPO. This helps the bank determine the issue price by building a demand curve in order to ensure that the issue is not overpriced or underpriced.

In the video, we cover:
- What is book building?
- What are the four steps to completing an IPO with the book building process?
- What are the benefits of the book building process?
- What is the fixed price mechanism and its risks?

By going and meeting with institutional investors and groups of retail investors on a roadshow, bankers are able to start with a valuation range determined internally and work towards a set price for the issue.

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