Book building is more than just finance jargon—it’s the invisible hand guiding billions of dollars in Australia’s IPO market every year. As 2025 ushers in regulatory tweaks and a more competitive environment for public offerings, understanding this process is vital for investors, founders, and anyone interested in capital markets.
What is Book Building and Why Does It Matter?
Book building is the process where an investment bank (the ‘bookrunner’) gauges investor demand for shares in an upcoming initial public offering (IPO) before the final price is set. Instead of guessing a price or using a fixed one, companies and their advisors ask institutional investors—like super funds and fund managers—how many shares they’d buy, and at what price. This feedback forms the ‘book’ of demand, allowing the issuer to price the IPO as close to market reality as possible.
- Dynamic Pricing: The final offer price reflects genuine investor appetite, not just company ambition.
- Efficient Allocation: Shares go to investors willing to pay the most, often resulting in a smoother debut on the ASX.
- Lower Volatility: With investor input, wild price swings post-listing are less likely.
In 2025, nearly all major IPOs in Australia—from fintech disruptors to mining giants—use book building as their cornerstone pricing mechanism.
How the Book Building Process Works in Australia (2025 Update)
The book building process in Australia has evolved, especially after the ASIC and ASX reviews in 2023-24. Here’s a simplified walkthrough, reflecting the latest regulatory best practices:
- Pre-marketing: The company and lead manager approach institutional investors to gauge early interest, often via virtual roadshows.
- Bid Collection: Investors submit non-binding bids stating how many shares they want and the price they’re willing to pay—typically within a pre-set range.
- Book Analysis: The bookrunner reviews the demand curve, identifies price clusters, and tests different allocation scenarios.
- Pricing & Allocation: The final IPO price is set, and shares are allocated, with priority often given to long-term investors.
- ASX Debut: The company lists, and trading begins—ideally with minimal price disruption.
2025 innovations include:
- Digital Platforms: New electronic book building platforms have sped up bid collection and improved transparency for both issuers and investors.
- Retail Access: Some IPOs now allow sophisticated retail investors to participate directly, not just institutions, thanks to regulatory changes around investor classification and digital onboarding.
- Green and ESG-linked IPOs: Book building for sustainability-focused IPOs increasingly considers not just price, but also investor ESG credentials in allocation decisions.
What Does Book Building Mean for Investors and Companies?
For investors, book building offers a chance to influence the IPO price and potentially secure allocations in oversubscribed floats. However, large institutional players still dominate, and allocations are never guaranteed—especially in hotly anticipated deals.
For companies going public, book building offers several clear benefits:
- Helps maximise capital raised by finding the price investors are truly willing to pay
- Reduces the risk of underpricing (leaving money on the table) or overpricing (leading to a weak debut)
- Builds early relationships with cornerstone investors who may support the company post-listing
Book building isn’t perfect. Critics point to lack of transparency, potential favouritism in allocations, and the limited role for retail investors. However, recent reforms by ASIC and the ASX—including greater disclosure of allocation criteria and digital bid tracking—are helping level the playing field in 2025.
Real-World Example: The 2025 IPO of GreenGrid Energy
In March 2025, GreenGrid Energy—a major player in renewable infrastructure—used book building to raise $650 million on the ASX. The company set an indicative price range of $2.50–$3.10 per share. After strong demand from super funds and global ESG investors, the book was heavily oversubscribed. The final price was set at $3.05, with cornerstone allocations to three Australian super funds and a portion reserved for eligible retail investors via a digital platform.
This deal showcased how book building can efficiently balance institutional demand with retail access, all while ensuring price discovery that reflects market sentiment in real time.
The Future of Book Building in Australia
With more IPOs expected in the pipeline and ongoing digital transformation, book building is set to remain the backbone of Australia’s capital raising ecosystem. Investors—both institutional and retail—should keep a close eye on evolving participation rules, while companies should view book building as an opportunity to engage meaningfully with the market from day one.
