Definition
Fixed Price Issue
A fixed price issue is an IPO where the company sets a single, definite price per share in advance, instead of discovering it through bidding.
In a fixed price IPO, the full price is printed in the prospectus and investors simply apply at that price. Demand is known only after the issue closes. This method is simpler and is often used for SME IPOs and smaller offerings on the BSE SME and NSE Emerge platforms.
The trade-off is that there is no price discovery; if the company mis-prices the issue, it may be either heavily oversubscribed (suggesting it left money on the table) or undersubscribed. Larger mainboard companies almost always prefer book building instead.
Related terms
- Book BuildingBook building is the price-discovery process where an IPO's final price is set from the bids investors submit within a price band, rather than fixed in advance.
- OversubscriptionOversubscription is when an IPO receives bids for more shares than are on offer, expressed as a multiple such as '10x'.
- SME IPOAn SME IPO is a public issue by a small or medium enterprise listed on a dedicated exchange platform with relaxed eligibility but higher minimum investment.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.