A price band is the difference between floor price and a cap price between which a seller will let buyers place bids on a security, usually during an initial public offering (IPO). It is a range of price at which IPO is bid for. The price band's floor and cap provide guidance to the buyers.
For example, let's say Company Alpha is going to go public. As part of the IPO process, Bank ABC (Company Alpha's investment bank) sets a price band on its shares between Rs. 400 per share to Rs. 450 per share. This means that buyers must bid at least Rs. 400 a share for the first issue of the shares.
It is the company which files the IPO decides about price band with assistance from lead managers or merchant bankers. Lead managers do a detailed market study competitive analysis to find out the right range.
No comments:
Post a Comment