Book building is a systematic process of generating, capturing and recording investment demand for shares. Typically, the issuer hires a large investment bank to act as a major securities underwriter or book runner. It is an alternative method of issuing a public issue where applications are accepted by applicants instead of asking them to apply for a public offer on the basis of a strong allocation such as financial institutions, corporations or high net-worth individuals.
Book building is a common practice in developed countries and has also entered emerging markets. Bids can be submitted online, but the book is maintained off-market by the bookstore and the bids remain confidential to the author. In contrast to the public issue, the book creation route will see a minimum number of applications and a large order size per application. On the advice of the issuer, the price of the new share is determined after the book is closed at the discretion of the bookseller.
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