BUILDING A BETTER BOOKBUILDING SYSTEM – AN EXAMINATION OF THE UK’S BOOKBUILDING REGIME AND PROPOSED REFORMS

Tong Jing Lim

Abstract


In 2013, shares of the UK Royal Mail were underpriced by an average of approximately nine percent per share, resulting in the government making £180 million less than it could have at the time of the initial public offering (IPO). Although the 2014 independent review by Lord Myners claimed that a price near the levels seen in the aftermarket could not have been achieved at the time of the IPO, the Myners Report acknowledged that the current price formation process in the UK is not perfect, and that improvements must be made. This paper examines the current UK price formation process and argues that, notwithstanding its flaws, the present bookbuilding system should not be replaced by an auction system as advocated for by the Myners Report. Rather, this paper submits that bookbuilding should be retained in light of its significant advantages, albeit with certain regulatory amendments that this paper proposes to improve the price formation process.

 For the full text of the article, please click here: http://discovery.ucl.ac.uk/1515996/

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