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Accelerated Bookbuild (Explained: All You Need To Know)

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What is an Accelerated Bookbuild?

What’s important to know about it?

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Let me explain to you what Accelerated Bookbuild is all about and why it’s important!

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What Is Accelerated Bookbuild

In equity capital markets, an accelerated bookbuild refers to the process of offering equity securities within a very short period of time.

In other words, when companies go through an accelerated bookbuild process, they are looking to raise equity capital quickly to fund a specific project, finance an acquisition, or fund a business operation of some kind.

Typically, companies will raise capital this way when they are in immediate need of capital and they may not have another alternative form of financing.

For example, if a company is heavily leveraged and cannot raise additional debt capital, it may have no choice but to engage in an accelerated bookbuild to quickly offer shares in the equity capital markets.

In essence, an accelerated bookbuild is an offering of shares that may only last between twenty-four and forty-eight hours before the book is closed.

Keep reading as I will further break down the meaning of accelerated bookbuild and tell you how it works.

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How Does Accelerated Bookbuild Work

Since the accelerated bookbuild is a rapid offering of shares in the equity capital markets, companies looking to raise capital will typically need to follow a certain process.

The process starts with a company hiring an investment banking firm to act as the underwriter of the offering.

Once the investment banking firm is hired, they will prepare a draft prospectus for the offering and send it out to identified investors who may have an interest in buying shares of this company.

In this process, the underwriter will estimate a price range for the offering so investors can assess whether or not they may have an appetite to invest.

Investors are given a short period of time, between 24 to 48 hours, to decide if they are interested in bidding for the shares.

Since the offering period is so short, the underwriter will not spend a lot of time advertising the offering but will approach investors that it believes may have an interest in buying shares of the company.

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Accelerated Bookbuild Pros And Cons

An accelerated bookbuild has its advantages and disadvantages. 

The main benefit for issuers is that they can raise capital quickly if they are not in a position to raise the needed capital via debt or other means.

As a result, within a matter of days a company will be able to access capital immediately needed by its business.

On the other hand, issuers will not have enough time to properly perform their security pricing discovery when you go to market and see how much demand there may be for the offering.

As such, the company will essentially set the price to be the highest bid received by investment bankers.

From an investor’s point of view, companies that need capital quickly may be willing to provide more attractive terms to entice investors.

Savvy investors can find great investment opportunities when buying shares in an accelerated bookbuild.

On the other hand, the additional reward comes with potential risks as well.

Since the offering is so short-lived, underwriters and shareholders will not have the luxury of time to perform adequate due diligence on the company, assess the company operations, and analyze its fundamentals.

Since the decision to purchase must be done rapidly, investors should only engage in such investment opportunities if they understand what they are doing and the associated risks.

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Accelerated Bookbuild FAQ

What does accelerated bookbuild mean?

An accelerated bookbuild is a type of offering in the capital markets where shares are offered for a very short period of time with little to no marketing efforts.

Investment bankers and financial institutions are typically offered to bid on the offering where the highest bidder takes the lot.

Why do companies offer shares in an accelerated bookbuild?

There are many reasons why companies may offer shares in an accelerated bookbuild but the main reasons are companies that are in a dire need of capital, those that cannot raise capital in another way, those engaged in a merger or acquisition, or to fund a specific urgent project.

How are the shares offered to the market?

An accelerated bookbuild is a quick offering of shares in the equity capital market.

Very often, an issuer will contact a few investment firms and financial institutions that may be interested in underwriting the placement.

Then, the shares are offered to the firm offering the highest backstop price.

Typically, the placement with the investor is done overnight and the securities are priced within 24 to 48 hours.

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Takeaways 

So there you have it folks!

What does accelerated bookbuild mean?

In a nutshell, an accelerated bookbuild is the process of offering shares in the capital equity market in a very short period of time.

Since the offering is so short-lived, underwritings and investment bankers will not do a lot of marketing and promotion of the offering.

Instead, they quickly offer the shares to potential investors in an attempt to quickly generate demand.

The accelerated bookbuild process can be used for many reasons, such as a company urgently needing additional cash and cannot access capital in any other way, companies engaged in M&A activity, or quickly funding a business transaction.

Very often, accelerated bookbuilds are done overnight where the issuer offers shares to different underwriters and financial institutions in an auction-like manner where the highest bidder takes the offering.

Now that you know what an accelerated bookbuild is all about and how it works, good luck with your research!

Back stop
Debt financing 
Accredited investor
Institutional investor
Offering price 
Debt yield ratio
Loan-to-value ratio
Financial roadshow 
Syndicated loan
Author

Amir K.
Hello Nation! I'm a lawyer by trade and an entrepreneur by spirit. I specialize in law, business, marketing, and technology (and I love it!). I'm also an expert SEO and content marketer. On this blog, I share my experience, knowledge, and provide you with golden nuggets of useful information. Enjoy! Feel free to connect with me on LinkedIn.

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