Which of the following is true of the book-building process?

Question

Quizplus · Accepted Answer

The book-building process allows for the issue to be priced more accurately based on the demand for the issue, as investors submit their bids and the final price is determined based on the highest price at which all shares can be sold. Allocation of shares in oversubscribed offerings is not done using a fixed formula, but rather on a discretionary basis by the investment bank, so choice A is incorrect. Choice B is also incorrect as investment banks do have some leeway in how to allocate shares. Finally, choice C is not accurate as allocation of shares is typically not done on a pro-rata basis, but rather at the discretion of the investment bank.

Which of the Following Is True of the Book-Building Process