The pricing process in equity offering is a difficult job. Explain how this difficult job is...

The pricing process in equity offering is a difficult job. Explain how this difficult job is performed under open price book building mechanism.

Solutions

Expert Solution

Book building is a mechanism where pricing of securities for the first time in Initial Public Offering. The share prices are determined on the basis of real demand for the shares in the market. It is based on the various price levels in the market. When the company is not sure about the exact price at which the company sells its shares, it will decide a price range instead of an exact figure. Thus wide range of prices is offered for the investors and will ask them to bid on. This process is called book building. This is treated as an alternative to firm allotment.

Book building process

Appointment of investment banker : The first step is appointing investment banker. It conducts due diligence, and fixes the size of the capital issue.
Collecting bid : Investors are asked to bid to buy shares
Price discovery : Bids are aggregated by investment banker and price will be fixed by using weighted average method. The price will be declared as cut off price
Publicizing : Companies will publicize the bids received by them in this stage.
Settlement : In this process application amount will be collected by the company fro bidders and the shares will be allotted to them.

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Explain how the job interview process is similar to the stages in the personal selling process....

Explain how the job interview process is similar to the stages in the personal selling process. Be specific.

Job structure development is dependent on a process of job evaluation. Explain this process.

Explain the hedonic pricing model of job risk. As part of your discussion, explain the shape...

Explain the hedonic pricing model of job risk. As part of your discussion, explain the shape of workers' indifference curves, isoprofit curves, and the hedonic wage function.

Please explain job costing and process costing in your own words along with how it can...

Please explain job costing and process costing in your own words along with how it can be used in daily business life.

2. Consider how the pricing model would work for a job that was half the acres...

2. Consider how the pricing model would work for a job that was half the acres but half the distance from his farm.

For an MNC, a source of equity includes retained earnings a global equity offering a domestic...

For an MNC, a source of equity includes retained earnings a global equity offering a domestic equity offering All of these are sources of equity for an MNC.

Underwriting refers to the process of selecting, classifying, and pricing applicants for insurance. Explain the basic...

Underwriting refers to the process of selecting, classifying, and pricing applicants for insurance. Explain the basic principles of underwriting. Identify the major sources of information available to underwriters. Explain the Underwriting Cycle.

the process of forecasting new products is difficult. why? how can new peoducts be forecast?

Why any change is difficult? How to make a change process smooth? (six-sigma)

Cost and Pricing - Many businesses are offering their products and services over the Internet. Find...

Cost and Pricing - Many businesses are offering their products and services over the Internet. Find well known company and, determine the following: A product (or service) description A product price Based on your responses to parts (1) and (2), along with the description of the company's business, identify the potential costs that are required to provide the product selected in part (1) and categorize them as fixed or variable. Which product do you believe has the largest contribution margin...

Subjects