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Bookbuilding
When a company is about to have a new issue of shares (possibly an IPO), its advisers may well do the rounds of the City fund managers to establish how many shares they are interested in taking and at what price. This is known as bookbuilding, and its purpose is to help the company find an offer price that ensures the new issue is successful. The bookbuilding process can begin several months before the company floats:Two months to flotation: the company's investment banks decide which institutional investors to target.One month to flotation: roadshows begin. Management and banking advisers meet potential investors to present their case and to get a feel for the level of interest.Two weeks to go: bookbuilding starts in earnest. Advisers canvas interested investors to establish how many shares they want and how much they are prepared to pay. If demand is weak, the bankers may cut the price range of the issue.One week to go: investors confirm to the banks the exact number of shares that they want.One day to go: the company and its bankers make a final decision on price, and allocate shares.
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