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| Filing Range |
Filing range is a range of prices in which a minimum and a maximum offer price are given. The pricing of an IPO begins at the time the IPO is filed. To go public, a company must register with the Securities and Exchange Commission (SEC) and file a preliminary prospectus containing basic information on the company and a summary of the offering.
The issuer and its underwriter agree on a filing range and this price range is listed in the preliminary prospectus. Underwriters incorporate available information about the company at the time they set the filing range.
The filing range reflects the information derived from due diligence and through the underwriter’s long-term relationship with the issuer. Underpricing depends upon the location of the offer price, relative to the filing range contained in the registration statement.
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When the underwriters are faced with high demand among investors, the offer price is adjusted to a point at or above the maximum price of the filing range. The IPOs priced above the filing range are expected to be more underpriced.
When the underwriters are faced with low demand among investors, the offer price is adjusted to a point at or below the minimum price of the filing range. The IPOs priced below the filing range are expected to be less underpriced or even overpriced. The midpoint of the filing range is used to estimate the expected offer price.
