Last updated on Oct 23, 2023
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Bookrunner definition
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Bookrunner selection
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Bookrunner vs lead manager vs co-manager
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Bookrunner benefits
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Bookrunner challenges
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Here’s what else to consider
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If you are interested in investment banking, you may have heard of the term bookrunner. But what does it mean and what does it do in capital markets? In this article, you will learn about the role and responsibilities of a bookrunner, how it differs from a lead manager and a co-manager, and why it is important for issuers and investors.
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1 Bookrunner definition
A bookrunner is an investment bank that manages the main aspects of a capital market transaction, such as an initial public offering (IPO), a bond issuance, or a secondary offering. The bookrunner is responsible for underwriting the securities, setting the price and allocation, and distributing them to investors. The bookrunner also maintains the book of orders, which records the demand and interest for the securities from potential buyers.
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2 Bookrunner selection
The issuer of the securities, which can be a corporation, a government, or an organization, usually selects the bookrunner based on several criteria, such as reputation, expertise, relationship, fees, and market conditions. The issuer may also appoint more than one bookrunner to share the risk and workload, especially for large and complex transactions. In this case, the bookrunners form a syndicate and cooperate with each other.
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3 Bookrunner vs lead manager vs co-manager
A bookrunner is often confused with a lead manager or a co-manager, which are also investment banks involved in a capital market transaction. However, there are some differences in their roles and functions. A lead manager is the main coordinator of the transaction, who oversees the syndicate, advises the issuer, and liaises with regulators and other parties. A co-manager is a junior member of the syndicate, who assists the bookrunner and the lead manager in marketing and selling the securities. A bookrunner can also be a lead manager or a co-manager, depending on the size and structure of the transaction.
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4 Bookrunner benefits
A bookrunner plays a crucial role in ensuring the success of a capital market transaction, as it influences the pricing, allocation, and distribution of the securities. A bookrunner can benefit the issuer by maximizing the proceeds, minimizing the cost of capital, and enhancing the market perception and demand for the securities. A bookrunner can also benefit the investors by providing them with access, information, and guidance on the securities.
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5 Bookrunner challenges
A bookrunner also faces some challenges and risks in its role, such as market volatility, regulatory compliance, reputational damage, and legal liability. A bookrunner has to deal with the uncertainty and fluctuations of the market conditions, which can affect the pricing and demand for the securities. A bookrunner has to comply with the rules and regulations of different jurisdictions, which can vary and change over time. A bookrunner has to protect its reputation and credibility, which can be harmed by any issues or controversies related to the transaction. A bookrunner has to bear the legal responsibility for the accuracy and completeness of the information and documents provided to the issuer and the investors.
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6 Here’s what else to consider
This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?
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