What is an Accelerated Bookbuild
An accelerated bookbuild is a form of offering in the equity capital markets. It involves offering shares in a short time period, with little to no marketing. The bookbuild of the offering is done very quickly in one or two days. Underwriters may sometimes guarantee a minimum price and sale proceeds to the firm.
BREAKING DOWN Accelerated Bookbuild
An accelerated bookbuild is often used when a company is in immediate need of financing, in which case debt financing is out of the question. This can be true when a firm is looking to make an offer to acquire another firm. In simplified terms, when a company is unable to obtain additional financing for a short-term project or acquisition due to its high debt obligations, it can use an alternative route of obtaining quick financing from the equity market through a process known as accelerated bookbuild.
Book building is the security price discovery process that involves generating and recording investor demand for shares during an initial public offering (IPO) or other issuance stages. The issuing company hires an investment bank to act as underwriter. The underwriter determines the price range the of the security and sends out the draft prospectus to multiple investors. The investors bid the number of shares that they are willing to buy, given the price range. The book is open for a fixed period of time, during which the bidder can revise the price offered. After a predetermined period of time, the book is closed and the aggregate demand for the issue can be evaluated so that a value is placed on the security. The final price chosen is simply the weighted average of all the bids that have been received by the investment banker.
With an accelerated bookbuild, the offer period is open for only one or two days and with little to no marketing. In other words, the time between pricing and issuance is 48 hours or less. A bookbuild that is accelerated is frequently implemented overnight, with the issuing company contacting a number of investment banks that can serve as underwriters on the evening prior to the intended placement. The issuer solicits bids in an auction-type process and awards the underwriting contract to the bank that commits to the highest back stop price. The underwriter submits the proposal with the price range to institutional investors. In effect, placement with investors happens overnight with the security pricing occurring most often within 24 to 48 hours.
For example, in 2017, Singapore sovereign wealth fund GIC Private Limited sold 2.4% of its outstanding shares and voting rights in Swiss bank UBS Group. The offer was made only to qualified persons, such as high net worth companies. The deal was covered in 20 minutes and allocations reflected strong support from some investors, with the top 10 orders receiving half the shares. There were around 140 lines in the book. The sale, which was conducted by UBS as sole underwriter, wrapped up in two and a half hours.