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Book building

The process of collecting investor orders at various prices during the roadshow to discover demand and set the final offering price.

Investors submit indications of interest: how many shares they want and, often, the highest price they will pay. The bookrunner assembles these into a demand curve and decides where to price, usually leaving something on the table so the stock trades up on day one.

Coverage language leaks and moves pre-market sentiment. "Multiple times covered" means orders far exceed shares available and the range is likely to be raised; "struggling at the low end" usually precedes a price cut or a pulled deal.

Example: a deal offers 15M shares in a $17 to $19 range. The book collects orders for 90M shares at $19, six times covered. The range is raised to $21 to $23 and it prices at $23.

Related: ipo, underwriter, ipo-price-range, ipo-allocation, roadshow

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

A range beside a trendOne chart swinging between a flat floor and ceiling, another stepping upwards inside a pair of sloping lines.Range-boundresistancesupportprice bounces between two levelsTrendingthe trend channelhigher highs and higher lowsA range has two flat edges; a trend has two sloping ones.
Range versus trend. On the left price keeps bouncing between the same floor and ceiling, which is a range. On the right each high and each low is higher than the last, inside a pair of sloping lines called a channel.

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