Accelerated bookbuild

3 key takeaways

• Accelerated bookbuilds are used to quickly raise capital by selling shares to institutional investors.
• This method is characterized by a short time frame, often just a day or two.
• It helps companies take advantage of favorable market conditions and investor demand.

What is an accelerated bookbuild?

An accelerated bookbuild is a financial process used by companies to quickly raise capital by issuing and selling shares to institutional investors. This method is typically completed within a very short time frame, often within one or two days. The expedited nature of an accelerated bookbuild allows companies to capitalize on favorable market conditions and strong investor demand without the prolonged process of a traditional public offering.

The process involves an investment bank or financial institution acting as an underwriter, which contacts potential institutional investors to gauge their interest and commitments for the new shares. Once sufficient interest is gathered, the shares are priced and allocated rapidly, often within 24 to 48 hours.

Examples of accelerated bookbuild

• Capital raising: A company needing to quickly raise funds for a strategic acquisition might use an accelerated bookbuild to issue new shares and secure the necessary capital.
• Market opportunities: A company may take advantage of a sudden surge in its stock price or positive market sentiment by issuing shares through an accelerated bookbuild, thus maximizing the capital raised.

Importance of accelerated bookbuild

The accelerated bookbuild process is important for several reasons:

• Speed: It allows companies to raise capital quickly, which is essential in situations where timing is critical.
• Market conditions: It enables companies to take advantage of favorable market conditions, such as high stock prices or strong investor demand.
• Flexibility: The method provides flexibility in capital raising, allowing companies to respond swiftly to financial needs or opportunities.

How accelerated bookbuild works

The process of an accelerated bookbuild typically involves the following steps:

1. Engagement: The company engages an investment bank or financial institution to act as the underwriter.
2. Investor outreach: The underwriter contacts potential institutional investors to assess interest and secure commitments for the new shares.
3. Pricing and allocation: Based on the feedback from investors, the shares are priced, and allocations are determined, usually within 24 to 48 hours.
4. Completion: The shares are issued, and the funds are transferred to the company, completing the capital-raising process.

Real-world application

Consider a technology company that needs to raise $100 million quickly to fund a new project. The company decides to use an accelerated bookbuild process. It engages an investment bank, which then contacts institutional investors to gauge their interest in purchasing the new shares. Within 24 hours, the bank gathers sufficient commitments, prices the shares, and allocates them to the investors. The company successfully raises the $100 million it needed, all within a couple of days.

Understanding accelerated bookbuilds helps companies and investors appreciate the advantages of rapid capital-raising methods in dynamic market environments. To further explore related topics, you might want to learn about public offerings, underwriting processes, and institutional investing.