What is ipo price band ?
Angelina asks:
What it means price band is between 530-630 ? I applied for Emaar-MGF IPO at cut-off. Now it looks like it will not be a good bet.
What it means price band is between 530-630 ? I applied for Emaar-MGF IPO at cut-off. Now it looks like it will not be a good bet.
What does it mean that IPO will be listed ? Does this price band define max / min amount at which IPO will be listed ?
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Since many people apply for an IPO, very few end up with the shares.
Here’s why this happens and how the IPO game works.
The company wants to ‘discover’ its price
In earlier years, the company determined a fixed price for the stock issue. The issue was marketed to the general public through advertisements and a media campaign.
Today, companies prefer a book building process. Book building is the process of price discovery. That means there is no fixed price for the share.
Instead, the company issuing the shares comes up with a price band. The lowest price is referred to as the floor and the highest, the cap.
Bids are then invited for the shares. Each investor states how many shares s/he wants and what s/he is willing to pay for those shares (depending on the price band).
MEANING OF PRICE BAND IN TERMS of IPO WITH BOOK BUILDING METHOD IS
lowest bottom price fixed for bidding AND
upper floor price for for bidding