With a mere two weeks of trading lefts before the IPO process...

With a mere two weeks of trading lefts before the IPO process kicks in, I am interested to find out more about the Nasdaq IPO pricing process. It appeared that the recommended IPO price range is primarily based on the valuation of the company carried out by independent analysts, and endorsed by the underwriters using methods such as Discount Cashflow on the expected sales figures over the next few years after obtaining the regulatory approval for commercialisation.

In general, the price is determined through a combination of factors that assess the company's value, market demand, and investor sentiment. The enterprise valuation of the company will be divided by the aggregate of the total number of shares and options on issue to determine the share price. A generic process might include:

1. Valuation by Underwriters

The company seeking to go public will typically hire investment banks or underwriters to help determine the IPO price. The underwriters assess the company's financials, growth potential, and industry comparables to set a target valuation.

2. Roadshow

The company, along with its underwriters, will usually embark on a "roadshow," where they meet with potential investors, analysts, and institutional buyers. This gives them a sense of how much demand there is for the stock and helps gauge investor sentiment.

3. Price Range

Based on the feedback from the roadshow and the financial analysis, the underwriters will suggest a price range for the IPO. This range is often designed to attract investor interest while ensuring the company raises the intended capital.

4. Book-Building

During the roadshow and through investor feedback, underwriters collect orders from institutional investors. This process, known as "book-building," helps the company and its underwriters determine the final offering price within the established range. If demand is high, the final price may be set at the upper end of the range or slightly above it.

5. Final Price Setting

Just before the IPO goes public, the final offer price is set. This is typically announced the night before the offering, after finalizing the number of shares and the price that will be offered to investors.

6. Market Conditions

Broader market conditions and economic factors also play a role in setting the IPO price. If the market is volatile or bearish, companies may lower their IPO price or delay the offering altogether.

In essence, setting the NASDAQ IPO price is a balance of investor interest, market conditions, and the financial health of the company, with underwriters playing a central role in guiding the process.

Not advice, DYOR