Book Building

IPOs are offered at prices as detailed by their underwriters. Book building is the process through which an underwriter comes up with the price for the IPO being publicly offered. The underwriter of the IPO is normally an investment bank and this party determines the price by inviting institutional investors like fund managers to submit their respective bids for the price they would be willing to pay for a certain number of shares.

Hence book building is the means by which an underwriter can determine the overall price at which a company’s IPO will be publicly offered. To discover this price, the book-building process involves generating and keeping a record of investor demand for these shares before the underwriter arrives at their issuance price