Book Building

What is 'Book Building'

Book building is the process by which an underwriter attempts to determine at what price to offer an IPO based on demand from institutional investors.

BREAKING DOWN 'Book Building'

An underwriter "builds a book" by accepting orders from fund managers indicating the number of shares they desire and the price they are willing to pay.

RELATED TERMS
  1. Underwriting Fees

    Underwriting fees are monies collected by underwriters for performing ...
  2. Stabilizing Bid

    A practice used by underwriters to stabilize the secondary market ...
  3. Underwriting Risk

    The risk of loss borne by an underwriter. Underwriting risk generally ...
  4. Underwriting Spread

    The spread between the amount underwriters pay an issuing company ...
  5. Negotiated Underwriting

    A process in which both the purchase price and the offering price ...
  6. Competitive Bid

    A step in the initial public offering process whereby an underwriter ...
Related Articles
  1. Retirement

    IPO Basics: Getting In On An IPO

    The Underwriting Process Getting a piece of a hot IPO is very difficult, if not impossible. To understand why, we need to know how an IPO is done, a process known as underwriting. When a company ...
  2. Professionals

    New Issue Market

    FINRA Series 6 Exam Study Guide - New Issue Market. In this section: IPOs, underwriter and several kinds of underwriting agreements.
  3. Professionals

    C. Underwriting Corporate Securities

    Once a business has decided that it needs to raise capital to meet its organizational objectives, they must determine how to raise the needed capital. Most corporations at this point will hire ...
  4. Professionals

    Types Of Underwriting Commitments

    Firm Commitment In a firm commitment underwriting, the underwriter guarantees to purchase all of the securities being offered for sale by the issuer regardless of whether or not they can sell ...
  5. Professionals

    UNDERWRITING CORPORATE SECURITIES

    Underwriting Corporate Securities Once a business has decided that it needs to raise capital to meet its organizational objectives, they must determine how to raise the needed capital. Most corporations ...
  6. Professionals

    Public Issue And Cash Offer

    These are just two ways that companies can raise capital.
  7. Trading Strategies

    IPO Flippers And The Companies Who Hate Them (TWTR, ETSY)

    Learn how flipping activity affects an initial public offering.
  8. Professionals

    THE UNDERWRITING SYNDICATE

    Awarding the Issue There are two ways in which the corporation may select an underwriter. A corporation may elect to have multiple underwriters submit bids and choose the underwriter with the ...
  9. Retirement

    IPO Basics: Don't Just Jump In

    Let's say you do get in on an IPO. Here are a few things to look out for. No History It's hard enough to analyze the stock of an established company. An IPO company is even trickier to analyze ...
  10. Expenses

    While an IPO brings a lot of cash in the door, there are plenty of costs before you reach the IPO. Some can be paid by IPO proceeds, but you should seriously consider if your company can bear ...
RELATED FAQS
  1. What does the underwriter do in a new stock offering?

    Learn the role an underwriter plays for an initial public offering, and the steps an underwriter takes in preparing for an ... Read Answer >>
  2. Do underwriters make guarantees to sell an entire IPO issue?

    Underwriters represent the group of representatives from an investment bank whose main responsibility is to complete the ... Read Answer >>
  3. How does insurance underwriting differ from investment underwriting?

    Understand the difference between insurance underwriting and investment underwriting, including what types of risks an underwriter ... Read Answer >>
  4. How do I become an underwriter?

    Learn about the education, training and certification required to become an insurance underwriter as well as the important ... Read Answer >>
  5. What are examples of risks for all underwriter types?

    Learn about the risks faced by different types of underwriting activity. Explore specific examples of risks faced by insurance ... Read Answer >>
  6. How does an underwriter syndicate work together on an initial public offering (IPO)?

    Learn how underwriting syndicates work together when helping a company undertake an initial public offering, and learn about ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center