Book building is the system under which the demand for an offer to issue shares is kept by a corporate entity and the price of the shares is decided on the basis of the bid made by the investors for the number of shares issued.
Simply put, the issuing company asks the investor how many shares he wants and at what price he wants to buy them while determining the value of the security. With its help, an attempt is made to find out the fair value of the shares in the market. Investors who have personally bid for the IPO can also apply for it.
What is the way:
In the book-building process, a draft proposal is prepared, which is placed with the securities board. This gives information that the issue price will be decided through the book-building process. This process prescribes the time for receiving the bid. The bid is evaluated at the end of time and the price is announced.