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5:00An IPO from Inside: Bookbuilding, Allocation, Stabilization, the Greenshoe
The price you see on the IPO's first day isn't set by the market, it's engineered. Behind it sits a built order book, a deliberately short syndicate, and a 30-day option named after a shoe company.
A modern IPO is sold by bookbuilding, not a fixed price. The lead underwriters (the bookrunners) market the deal during a roadshow and collect indications of interest from institutions: how many shares they want and, often, the maximum price they'll pay. This order book reveals the demand curve, and the issuer and banks set the final offer price from it, usually within or above the marketed range when the book is oversubscribed (more demand than shares).
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