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The Coca-Cola Company Message Board

  • mycrof4 mycrof4 May 21, 1998 5:22 AM Flag

    Definition of Book-building inorder to u

    Book-building matches price with demand more

    The principle behind book-building is
    that investors are given the opportunity to indicate
    their demand for shares before the price is fixed and
    prior to finalisation of the prospectus. Underwriters
    would "build a book" by obtaining non-binding
    expressions of interest from potential investors in which
    they indicated the likely number of shares and the
    price at which they are prepared to accept. At the end
    of the marketing or "book-building" period, the
    overall size of the offer and the price at which shares
    would be sold were determined, having regard to the
    demand indicated during the book-building process,
    allocations to investors are made and underwriters enter into
    binding commitments to underwrite the sale of shares
    allocated to investors.

    In this structure,
    underwriting does not occur until the final few hours of the
    book-building period just prior to the announcement of trading
    and immediately after the size and the issue price of
    the offer have been finalised. As the price is fixed
    on the basis of investor demand and as the duration
    between the time when the price is fixed and when trading
    commences is short, theoretically, the likelihood of the
    issue price being fixed at a great disparity to the
    actual trading price would be minimised - hence, better
    price discovery and price matches demand more

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