25
could gain a
higher capital if
the
offering price is
higher. Despite
these
downfalls
of fixed
pricing,
underpriced
shares
and
cascading
demand,
it
can
still
guarantees
the
investors
with
a
certain
amount
of
proceeds
2.1.6.2 Book Building
Book
building
is
a method
for
price
discovery
of
the
shares.
In
this
method
of valuation,
the
appointed
underwriter
will
do
several
roadshows,
or
pre-marketing
of
the
shares,
to
different
investors
that
might
be
interested
in
the
shares within
a
specific
price
range.
Using
the book
building
method,
the underwriter
would
include
investor’s
information
into
the
price
of
the
offering.
According
to
Benveniste
&
Wilhelm
(1996),
book
building
is more
than
just
polling
investors
information
for
the
price
discovery,
it
is
also
an
attempt
to
know
the
demand
of
the
issue.
By
knowing
the
demand
from
investors,
it
is
then used to determine the size, price and allocation of the offering.
Through
careful
collection
and
publicizing
of the
investor’s
information,
the
book
building
method
could
diffuse
a possibility
of
cascading
demand
and
prevent
the winner’s
curse
effect
(Busaba
&
Chang,
2002).
Also,
by
including
information
within
the
share
price,
it will
neutralize
the
power
of individual
investors,
between
the
informed
and
uninformed.
Book
building
is
an efficient
strategy
of
pricing
to
many
of
the
other
alternative
since
it
makes
better
use
of
the
information
acquired
from
the
investors
about
the
demand
of
the
shares
(Benveniste
& Wilhelm,
Jr, 1996).
A price
band
is fixed
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