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2.1.7 Natures and Value of Investors’ Information
in Book Building
When
it
comes
to
book
building,
it
is
simply
a
method
of
price
discovery
by
polling
potential
investors.
A
benefit
of
this
marketing
strategy
is
taken
from
the possession of unique information by investors that could be used to
resolve the
problem of
pricing ambiguity. Data
mining information, taken
from
potential
investors
comes
in
two
forms.
One
is
the
“hard”
information
and
the
other
is
the
“soft”
information (Benveniste &
Wilhelm, Jr,
1996).
Stein
(2002),
Peterson and Rajan
(2002),
Goetzmann
et al.
(2007)
and
Engelberg
(2008)
believed
that
the distinction
between
“hard”
and
“soft”
information
are
important
in order
to gain
financial
information
which
will
affect on pricing of shares and assets (Arnold et al, 2010).
The
“hard”
information
is
the
insight
about
the
company’s
prospect
of
the
future. It
is
generally agreeable that
an
investor’s insight about the
issuer
might be negligible at
best, however, each investor will know his or
her
demand
for
the
issue. This
demand
is
the
second form
of
the
information,
the
“soft”
information.
“Soft”
information
is
valuable
since
it
will
aggregate
the
information
at
road
shows,
to
the
actual
pricing
of
the
issue.
This
demand
does
more
than
just
aggregating
information
to
the
price.
Some
investors
just
have
more
power
than
other
investors.
It is
from
this
particular
group
of
powerful
investors,
that
have
market
power,
and
their
level
of interest
can
influence,
or
persuade
other
investors
that
would
determine
the
success
or
failure of the issue. (Benveniste & Wilhelm, Jr, 1996).
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