Question

under ........... method , issue price of shares is based on bidding.​

Answer 1

The method of offering shares by providing a price range is called book building method. This method provides an opportunity to the market to discover price for the securities which are on offer. ADVERTISEMENTS: ... The issue price is determined after the bid closure based on the demand generated in the process.

Answer 2

Answer:

Under the Book Building method, the issue price of shares is based on bidding.

Explanation:

• The book-building approach refers to the method of issuing shares by establishing a price range.
• Building method shares will be offered through a bidding procedure in the book.
• The corporation publishes a Red Herring Prospectus that includes a price range or price band and invites investors to bid on it.
• In this strategy, the corporation does not set a specific price for the share but rather provides a price range, such as 80 to 100.
• When bidding for shares, investors must determine at what price they want to bid, for example, 80, 90, or 100.
• The lower price band (80) is referred to as the floor price, while the highest price band (100) is referred to as the cap price.
• The cut-off price is the last price at which shares are offered to investors.
• The ultimate price is determined by the board based on the demand and supply of the shares.
• Investors can bid on whatever number of shares they want to acquire at a certain price range.
• This type of bidding is open for 5 days.
• Bids with application money must be presented to Lead Merchant Bankers known as 'Book Runners,' who record the bids in a book.
• Following bidding, the corporation establishes a cutoff price at which the shares on sale can be sold.
• The ultimate price is disclosed in the prospectus issued by the corporation.
• The Book Building approach is utilized for public issues, such as IPOs and FPOs.

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