Equitization and divestment continue to be one of the crucial pillars of the economic development strategy over the period 2020-2030. The Vietnamese Government has been completing the legal framework to speed up the process of privatization and divestment over the past 3 years. One of the highlights is the regulation on the application of Book Building (BB) Method to offer state shares in 2018. BB, an effective mechanism to determine the price on the primary market, is encouraged to apply on most markets. However, according to Hanoi Stock Exchange, for four months since Circular 21/2019/BTC-TT was released, 17 announcements of IPOs or divesture of state capital were whole lot sale auction or competitive offering. This implies the popularity of fixed price and discriminatory auction in Vietnam. Moreover, applying BB in Vietnam requires certain adjustments to theories. This paper presents the advantages and disadvantages of BB over fixed price and auction, reviews BB experiences of some economies, and make recommendations on the application of BB in offering state shares in Vietnam. Given that BB is expected to create a transparent and effective pricing mechanism and enhance the success of state share offering, this study indicates some points that need clarifying or adjusting to the current regulation, including (i) initial price and price range; (ii) time for disclosing information and opening order books; (iii) objectives of BB; (iv) cancel the results of BB; (v) selection of underwriters.
Pricing Mechanism and IPO Initial Return: Evidence from Pakistan Stock Exchange
