Book building is a systematic process of generating, capturing, and recording investor demand for shares.
Book building is an alternative method of making a public issue in which applications are accepted from huge buyers such as financial institutions, corporations or high net-worth individuals, almost on firm allotment basis, instead of asking them to apply in public offer.
Book building is a method of issuing shares based on a floor price which is indicated before the opening of the bidding process.
Book building is a common practice in developed countries and has made inroads into emerging markets as well.
The price at which new shares are issued is determined after the book is closed at the discretion of the bookrunner in consultation with the issuer.
The issue price is determined after the bid closure based on the demand generated in the process.
[3][4] A criticism of the current process is that it is very manual and communication is done via email, telephone calls and chat rooms.
There is strong interest from the investor side to automate this process and reduce operational risk by using an online platform.
Before Facebook's IPO, the book building process was used to determine how much the stock was worth before it was sold to the public.