Question
Fixed Price Issue Method and Book Building Method
| Points | Fixed Price Issue Method | Book Building Method |
| 1. Meaning | Under this method, the issue price of shares is mentioned in the prospectus and investors have to buy shares at that price only. | Under this method, the issue price is determined by a bidding process. |
| 2. Price of Shares | The exact price of shares is known in advance and it is mentioned in the prospectus. | The price of shares is not known in advance only the minimum price and maximum price at which the company is willing to sell the shares is known in advance. |
| 3. Prospectus | The company has to issue a prospectus and it contains the details of the price at which shares are offered and the total number of shares offered by the company. | The company issues a Red Herring Prospectus. It contains only the price band and the total size of the issue. |
| 4. Determination of Demand | The company comes to know the public demand for its shares only after the closure of the issue. | The company comes to know the public demand for its shares every day. The bids are registered in the book .everyday till the closure of the issue. |
| 5. Payment of Application Money | Application money or entire money has to be paid by the investor at the time of submitting the application for shares. | Only application money has to be paid at the time of bidding. Money will be collected only after the issue price has been fixed. |
| 6. When Used | It can be used for any issue i.e., Public issues, Rights Issues, FSOS, etc. | It is usually used in public issues i.e., IPO and FPO |
Generate a complete, print-ready paper with questions like this in minutes — across 16+ boards, with answer keys.