The bookrunner is a financial institution , the part of a banking consortium as consortium leader acts while for the allocation and placement of an emission is responsible.
The bookrunner (also called "global coordinator") first creates an issue and placement concept, which - in agreement with the issuer and the consortium - is followed by the definition of the subscription period within which the issue must be taken over by capital market participants. In the bookbuilding process, the bookrunner keeps an order book in which he collects the bids within the subscription period. This order book, which incidentally gave the bookrunner its name, guarantees the bookrunner a constant overview of the current demand. After the subscription period has expired, the bookrunner is responsible for setting the price, which is based on the subscriptions received by evaluating the order book. Here, the bookrunner analyzes the price elasticity, but at the same time must also take the issuer's ideas into account. The bookrunner then decides, in agreement with the issuer and the syndicate banks, which investors bid will be accepted.
The bookrunner usually acts as a syndicate leader within the framework of a banking consortium, which is to be legally qualified as a civil law company (BGB society) (§ § 705 ff. BGB). In order to be able to fulfill his tasks autonomously, the bookrunner regularly has - in amendment of the regulations of § 709 BGB - sole management and representation authority in the consortium. As a bookrunner, he is also responsible for putting together the banking consortium, taking into account the issues of the issuer. The tasks of the bookrunner are in turn to be legally qualified as agency (§ § 675 ff. BGB).
The scope of the functions of the bookrunner differs depending on whether the bookbuilding or the fixed price method was chosen for an issue.
Book building process
In the bookbuilding process, the order book is managed centrally by the bookrunner, who is solely responsible for the allocation of the issue according to uniform criteria. Since the bookrunner has the sole overview of the subscription situation with this procedure, he can derive the development of price elasticities from the order book and assess regional placement options. After the final price has been determined, the bookrunner allocates the issue to the syndicate banks, and may specify whether and to what extent investors should be taken into account.
Fixed price procedure
With the fixed price procedure , the issue price is set between the bookrunner and the issuer before the placement. The issue is then completely taken over by the bookrunner at this price and distributed to the syndicate banks based on the syndicate quotas. Order books are kept decentrally by each individual syndicate bank, which can allocate the issue according to its own criteria without having to observe uniform guidelines. The bookrunner has no influence on the allocation policy of the syndicate banks.
In the case of bookbuilding, the course is maintained by the bookrunner with the help of the " greenshoe option". If there is more demand than supply at the time of allocation, the bookrunner can exercise an over-allotment option - called a greenshoe - which entitles him to receive an additional issue amount of up to 10 to 15 percent of the nominal issue amount from the issuer. The option can be exercised within a period of approximately thirty days after the initial public offering.
The central function of the bookrunner shows how important the correct selection of the bookrunner can be, especially in bookbuilding. Because the amount of the issue price is not fixed in advance of the issue, but depends in particular on the skills of the bookrunner. For this reason, when selecting the bookrunner, the issuer must attach particular importance to good issuing standing, good marketing skills and a sound placement concept.
- ↑ in the order book you can see who signed when, how much and with what price limit
- ↑ a b Michael Bitz / Gunnar Stark, Finanzdienstleistungen , 2008, p. 223
- ^ Franz-Josef Busse, Fundamentals of operational finance , 2003, p. 198
- ↑ Deutsche Börse AG, Practical Handbook IPO: From Preparation to Implementation , 2006, p. 299