Series 79 practice questionmediumIPO Process
During an IPO, what is the primary purpose of the 'book-building' process?
- AFinalizing the underwriting agreement
- BAllocating shares to insiders
- CAssessing investor demand to inform pricing and allocation decisions✓ Correct answer
- DSubmitting the registration statement to the SEC
Explanation
Why C — Assessing investor demand to inform pricing and allocation decisions
Book-building gathers expressions of interest from potential investors, helping underwriters set the IPO price and allocate shares. It is not about allocating to insiders or finalizing legal agreements. Confusing the timing or purpose is a common error.
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