Price Band
The price band is a way of determining the value of an IPO in which the issuer determines an upper and lower limit for investors to bid.
The firm engages investment bankers to act as underwriters once the price band has been determined.
To calculate the price range, the underwriters consider criteria such as the company’s, industry’s, and economy’s growth forecasts; the firm’s net worth; EPS, and other considerations.
The price band is the agreed-upon pricing range between the issuer and the underwriter.
The price band is an important part of the book-building process because it tells the issuer how much money investors are prepared to spend to acquire a share of the company.
