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Book building is a process of pricing a new share issue. It is the process by which an underwriter attempts to determine at what price to offer an initial public offering based on demand from institutional investors.
The book is filled with the prices that investors indicate they are willing to pay per share, and when the book is closed, the issue price is determined by an underwriter by analyzing these values. Book building allows a syndicate to have a rough idea of the demand for the new issue, which may affect its price when it is actually issued.