Article

Cut-off Price
June 07 , 2012

In a book building public offer, the company fixes a price range at which it offers its shares. Bidders bid for their desired quantity and desired price (within this range) at which they would buy shares. After the bidding is complete, depending on how many shares are bid at which price, the price at which shares will be allotted is decided. This is called the cut-off price.

Investors who bid below the cut-off price get no shares. Investors who bid at or above it, get shares at the cut-off price. If there has been excess bidding compared to the shares on offer, investors are offered shares proportionally.

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