What is book-building (demand forecast)?

Book-building (demand forecast) is the process in which, to set the offer price, the lead managing underwriter presents an indicative price range and gauges demand from institutional investors, including the prices and quantities at which they wish to buy.

It surveys institutional demand ahead of the general subscription to find an appropriate price at which supply and demand match, and it is widely used overseas as well. Members of the issuer's employee stock ownership association and the underwriters, among others, may not participate in book-building.