Glossary
Bookbuilding
The process by which underwriters collect investor demand to set an IPO's final price and allocation.
Bookbuilding is the price-discovery mechanism used in most US and European IPOs. During the roadshow, underwriters meet institutional investors and collect indications of interest at various prices. Those orders are recorded in a single "book" maintained by the lead-left bookrunner.
At the end of the marketing period the syndicate evaluates the book — its size, the quality of the buyers, the price sensitivity — and recommends a final offer price and allocation to the issuer's board. A heavily oversubscribed book typically prices at or above the marketed range; a weak book may price below it or pull the deal.
Bookbuilding contrasts with auction-style IPOs, in which price is set by clearing investor bids algorithmically.