Quick Answer
The book is the syndicate manager's live ledger of investor demand for an offering. Institutional accounts submit non-binding indications of interest (IOIs) specifying the shares they want and the price range they will pay. The syndicate desk aggregates IOIs into a demand curve at each price level, tracks investor interest, prospective investors, price-level information, and underwriter splits, and runs know-your-customer (KYC) and new-issue-eligibility screens before allocation.
The book is the bookrunner's instrument panel for pricing, sizing, and allocation. Everything from the marketing meetings funnels into it, and everything that comes out (the final price, the allocation grid, the syndicate split) starts there.
Indications of Interest (IOIs)
An indication of interest (IOI) is a non-binding expression from an investor of (a) the number of shares it wants and (b) the price (or price range) it would pay.
- Solicited from institutional accounts during the road show and marketing period
- Aggregated into a demand curve at each price level
- Non-binding: the investor can withdraw or modify until the final price is set
- The aggregate demand curve is the foundation for the final pricing decision
For a typical IPO with a marketed range of $18-$22, the demand curve might show:
- $18: 25 million shares of demand
- $20: 18 million shares of demand
- $22: 9 million shares of demand
If the deal is sized at 10 million shares, the book is "covered" at the high end ($22 with 9 million is just short, but rounding plus aftermarket-seeking adds the buffer). If the demand at $22 collapses to 4 million, the syndicate manager would print at $20 or below.
Exam Tip: Gotchas
- IOIs are NON-BINDING until pricing. Investors may withdraw or modify after the final price is set. A "covered" book at the indicated range can still go to the wire if late-cycle market conditions shift.
- The demand curve drops as price rises. This is the basic shape of every IOI book; sharper drops above the midpoint signal a soft top of the range.
What the IOI Book Tracks
The book is more than a list of orders. The syndicate desk maintains four parallel views.
| Track | What It Captures |
|---|---|
| Investor interest | Shares wanted by account, broken out by price range |
| Price-level information | Where each investor's bid drops off (price elasticity per account) |
| List of prospective investors | Size of interest by account, including accounts not yet committed but in active dialogue |
| Underwriter split | How the issue is split among the underwriters: each syndicate member's allocation and free retention |
Each track answers a different question. Investor interest answers "do we have enough demand?" Price-level information answers "where is the clearing price?" The prospective-investor track answers "what is in the pipeline that has not yet committed?" The underwriter split answers "who gets credit for what?"
Exam Tip: Gotchas
- The book tracks BOTH committed IOIs AND prospective accounts. A prospect that is "still working" but has not yet submitted size is on a separate list inside the book.
- Underwriter splits are tracked inside the book. The syndicate manager allocates the deal across syndicate members based on selling effort, account relationships, and the original underwriting commitment.
Customer Assessments Before Allocation
Before any allocation goes out, every account in the book goes through three screens.
- KYC and anti-money-laundering screening: The syndicate desk confirms the account is on file and current
- New-issue eligibility screening: For IPOs of common equity, the desk confirms the account is not a restricted person under the new-issue rule (covered in the new-issue allocation restrictions section)
- Quality-of-account analysis: Long-term holder vs trader, prior IPO behavior, mandate fit with the issuer's profile
Quality-of-account analysis directs allocation toward investors who tend to hold rather than flip. An account that has flipped its last three IPO allocations within five trading days will get smaller allocations than an account that has held for a year.
Think of it this way: the bookrunner is not just matching demand to supply. The bookrunner is curating the shareholder base the issuer will live with for the next year. A book full of fast-money hedge funds prices well but trades down hard after the lock-up. A book anchored by long-only mutual funds prices a touch lower but supports the stock through the first earnings cycle.
Exam Tip: Gotchas
- Quality of account drives allocation, not just IOI size. Two accounts asking for the same number of shares at the same price can receive very different allocations based on holding-period history.
- The new-issue rule blocks restricted persons from buying IPO common stock. The eligibility screen is mandatory before allocation; the annual representation supports it.