Offering price

Offering price represents the price at which one share is offered for sale during an initial public offering (IPO). The term most commonly refers to shares, however, it can also be applied to the issuance of other securities, including bonds and structured instruments.

Setting the offering price is a crucial step in the IPO process. The underwriters, who are involved in the offering, play a significant role in determining and establishing the IPO price. In smaller IPOs, a bookrunner, which is the primary underwriting investment bank, takes charge of this task. They lead and oversee the offering of the company’s stock, including setting the offering price. In the case of larger IPOs, a syndicate of underwriters, comprising multiple investment banks, collaboratively establishes the offering price.

The offering price refers to the price at which newly issued stocks are made available to the general public through an underwriter. Since the primary objective of an IPO is to generate capital for the issuing company, underwriters must establish an offering price that will be appealing to investors. When determining the public offering price, underwriters take into account various factors such as the financial stability of the company, its profitability, market trends, growth potential, and investor sentiment.

There exists a crucial difference between an offering price and an opening price. The former is the price at which the newly issued securities start trading on an exchange on the first trading day. The latter is the price at which the securities issued in the IPO can be acquired prior to the start of the actual trading.