Accelerated bookbuild
Also known as: ABB, Overnight placing
A block of shares sold between the close and the open. The whole transaction is shorter than one meeting.
1 · SnapshotThe one idea to remember
2 · BeginnerWhat actually happens?
Sometimes a large shareholder wants to sell a big holding, or a company wants money quickly, and there is no time for a roadshow. So the whole sale is compressed into one night.
The market closes. The deal is announced. Institutions have a few hours to say how many shares they want and at what price. Before the market opens again, a price is set and the shares are allocated. By breakfast it is done.
The price is below the previous close. That discount is what buyers get for making a decision in the dark, with no time to do research and no chance to see how anybody else reacts.
One part of this needs care. Before the announcement, a handful of very large investors are usually told privately and asked whether they would take part. Those investors then know something the market does not, and they are forbidden from trading until it is announced. Managing that window properly is the main thing that can go wrong.
- 1
Wall-crossinghours
A handful of large investors are told confidentially and asked whether they would participate.
- 2
Launchminutes
The book opens after the close, with a price range or no range at all.
- 3
Bookbuild2–6 hrs
Orders arrive overnight; the desk builds and reprices the book in real time.
- 4
Pricingminutes
The price is struck before the market reopens, at a discount to the last close.
- 5
Settlement1–2 days
Shares are delivered and the seller is paid.
Insider status — Compliance, on both sides decides. A wall-crossed investor is an insider until the deal is announced and may not trade — which is why the list is short and the window is hours.
Is the book covered — The bookrunner decides. An uncovered book at dawn is a decision between a bigger discount and no transaction.
Who is on the deal
| Who | Side | What they are actually for |
|---|---|---|
| The seller | Sell side | Wants out of a large position without the weeks a marketed deal would take. |
| The bookrunner | Sell side | Builds and prices the book overnight, and sometimes guarantees the price. |
| Wall-crossed investors | Buy side | Are told before the market and are restricted from trading until it is announced. |
| The wider institutional market | Buy side | Sees the deal only at launch, and has hours to decide. |
| Compliance, on both sides | Neither | Controls who becomes an insider and when they stop being one. |
- Desk
- Equity Capital Markets
- Duration
- Hours, usually overnight
- Priced against
- The last closing price, at a discount
- Marketed to
- Institutions only
- Particular risk
- Insiders who know before the market does
What decides whether it completes
Not how hard this is, and not a rating — there is deliberately no total. It says which of five blockers decides whether this transaction happens at all, in the same order on all 70 transaction types so they can be compared. This publication's own reading; see the notice below.
- Pricedecides it
- Financingbarely applies
- Approvalbarely applies
- Diligencebarely applies
- Executiondecides it
What decides it here. Everything happens in a few hours, so the discount and the mechanics are the whole transaction. The particular execution risk is the insider window: a handful of investors know something the market does not, and the deal has to be announced before anybody can trade.
3 · IntermediateHow it runs in practice
Wall-crossing
Before launch, a small number of large investors are approached confidentially. They are told what is coming and asked whether they would participate and at what level. This is legitimate market sounding, and it is heavily regulated:
- The investor is told it is receiving inside information and consents.
- It is restricted from dealing in the shares until the information is public.
- Records are kept of who was told, when, and what they were told.
The purpose is to know before launching whether the deal will clear. A book that is half-committed before it opens is a book that opens.
Risk, or best efforts
- On a best-efforts basis, the bank builds a book and prices whatever it can. If demand is thin the price falls or the size shrinks.
- On a bought deal, the bank guarantees a price up front and takes the risk of placing it. That is a block trade, and the economics are entirely different.
What the discount reflects
Size against normal daily volume, first and mostly. Then the seller's identity — a fund exiting says something different from a company raising money for a named acquisition. Then whether any lock-up follows, because a buyer wants to know whether more is coming next month.
The morning after
Shares placed overnight frequently trade near the placing price for days, because a large amount of stock has just moved into hands that bought at a discount and some of it comes straight back. That is ordinary and it is why the discount exists.
4 · AdvancedThe numbers & the documents
The insider window is the real risk
Between the first wall-crossing call and the announcement, a small number of people know that a large seller is about to appear. If any of them trades, or tells somebody who does, that is market abuse. The controls are procedural — consent, restriction, records — and they are the reason the process is compressed into hours rather than days.
A useful diagnostic is the share price in the hours before an overnight placing. Persistent weakness before an announcement that nobody could have known about is exactly the pattern regulators examine.
Why sellers accept a worse price
Three reasons, all rational:
- Market risk. Three weeks of marketing is three weeks in which the price can fall further than the discount would have cost.
- Signalling. A long, publicised sale process advertises the overhang and invites others to sell ahead of it.
- Certainty. A fund with a deadline, or a company with a payment to make, is buying an outcome rather than a price.
The pre-emption limit
Where shareholders have statutory pre-emption rights, a company may issue only a limited proportion of its capital this way without a fresh vote. That cap is the reason large raises go through a rights issue instead: the fast route is available only up to a point, and beyond it the owners must be asked.
Institutional guidance in several markets sets that limit tighter than the law does, and companies that exceed it face opposition at the next annual meeting rather than an invalid issue.
Allocation, compressed
Even overnight, the issuer chooses. Wall-crossed investors who committed early are usually favoured — they took the risk of being restricted — and orders that arrive after the book is known to be covered are worth less. It is the same judgement an IPO makes over ten days, made in four hours.
The formulas above are standard textbook formulations, simplified for teaching. They explain the mechanism — they are not a valuation tool, and they will not reproduce a dealer’s price.
5 · Desk notesHow people on the deal think about it
Now say it back
Close the page and give Accelerated bookbuild in four sentences. It takes a minute and it is the only way to find out whether reading it was enough.
- Who wants what — name both sides and what each one is actually trying to get.
- What has to happen, in order — the three or four stages, not the whole timetable.
- Where the money comes from — cash, new shares, or borrowed; somebody has to fund it.
- What kills it — the ordinary way, not the dramatic one.
Where this transaction shows up elsewhere
- EasyBlock tradeDealA bank buys the whole holding outright at a guaranteed price, then owns the problem until it is placed
- EasyFollow-on offeringDealA listed company selling more shares
- EasyRights issueDealEvery shareholder is offered new shares in proportion
- EasyWhat kills a dealAnalysisFive ways a transaction fails to happen, counted across every deal on the site — and the one that decides most of…
- MediumPIPEDealA listed company selling shares privately, at a discount, usually because the public route is not open to it