bookbuilt

Bookbuilt is an adjective used in finance to describe an equity offering—most commonly an initial public offering or a follow-on issue—that uses the book-building process to set the price and allocate shares. The term denotes that price discovery and allocation are driven by investor demand gathered during a defined period, rather than by a fixed price set in advance or by an auction alone.

In a book-built offering, the issuer and its underwriters solicit indications of interest from potential investors within a specified price range. These indications form a demand book, which the underwriters use to determine the final offer price and to allocate shares according to a pre-agreed policy. Allocation often aims to balance broad participation with the interests of anchor or long-term investors, and may favor higher-demand investors or particular client groups.

The typical process includes announcing the price range, marketing the deal to potential investors, collecting orders and indications of interest, determining the final price, allocating shares, and listing the shares on a securities exchange. This approach emphasizes market-based price discovery, enabling underwriters to gauge demand across different investor segments before finalizing pricing.

Advantages of book-building include improved price discovery, more efficient capital formation, and greater likelihood of broader investor participation. Criticisms focus on potential underwriter discretion, possible allocation favoritism, and the risk of mispricing if demand is misread. Book-building is widely used in many markets, though practices and rules vary by jurisdiction.

See also: IPO, book-building, underwriter.