Pricing of the Issue
Chapters in this video
- 0:00 Why private placement pricing has no public comps
- 1:12 Negotiated pricing vs public bookbuilding
- 2:40 Gathering indications of interest for leverage
- 3:13 Strong IOIs support price, weak IOIs push it down
- 4:05 Firm commitment: agent locks in purchase price
- 5:09 Best efforts: issuer accepts what the market gives
- 6:12 Rapid-fire exam recap
What this video covers
- Why private placement pricing is always negotiated between the issuer and placement agent, never discovered through public bookbuilding
- How indications of interest (IOIs) serve as the placement agent's only evidence of market demand before sitting down at the negotiating table
- The relationship between strong IOIs and price support for the issuer, and between weak IOIs and downward price pressure or deal narrowing
- Why the distribution method determines which party bears pricing risk after the price is set
- How firm commitment transfers pricing risk to the placement agent, who locks in a purchase price before knowing the full resale outcome
- How best efforts leaves pricing risk with the issuer, who accepts whatever the market ultimately supports
- The exam trap of confusing public bookbuilding language with private placement negotiated pricing
Read the full lesson, free
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