What are the Different Types of IPO Offerings?

Published : 8 May 2023

1. Fixed price issue 2. Book-building issue

There are 2 types of IPOs 

1. Fixed Price Issue 

The fixed price issue requires the company to set a fixed price at which all of its shares will be offered to investors.

2. Book building issue 

The price of the book building issue is released during the IPO process. In this process, the company does not set a fixed price, but there are two price bands. The lowest price band is referred to as the "floor price," while the highest price band is referred to as the "cap price."

Difference between Fixed Price issue and Book building issue

1.  Pricing

The price of the share is set on the first day of its listing in a fixed price issue. In contrast, in a book building issue, the price is not specified and only the pricing band is initially fixed.

2. Demand

The demand for a fixed-price issue is unknown until the issue is closed. In contrast, the demand for a book building issue can be known every day.

3. Payment

When bidding for a share in a fixed price issue, investors must pay a 100% advance payment of the share price. In contrast, in a book-building issue, the payment is made after the shares have been allotted.

4. Reservations

In a fixed-price issue, 50% of the allocations are reserved for investors with >2 lakhs, and the other 50% to high-value investors. In contrast, in a book bidding issue, 35% of the allocations are for QIB, 35% for small investors, and the rest are reserved for the other categories of investors.