The offer price for shares in a public offer can be fixed before the issue. It can also be discovered through gauging the demand in the market for shares at various price points. The second method is called the book-building route.
In this, the issue manager fixes a price-band rather than a single price for
the IPO and asks investors to bid for shares in that price range. The price
band is fixed on the basis of the fundamentals of the company, the
performance of share prices of other companies in the same sector on
bourses and market survey conducted by issue managers. An investor can
bid for shares at various price levels. Normally, the demand for shares at the minimum price level is the maximum. But when the market is booming, the issue is often oversubscribed
at the higher end of the band itself. In such a case, the offer price is
ultimately fixed at the upper end of the band.
What is a follow on-public offer?
When a listed company makes a public offer to raise funds, it is called a
follow-on public offer. In these cases too, the offer price can be fixed or
be discovered through book-building. Normally, the offer price is at
a 10-20% discount to the prevailing share price in the market.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment