What is an offering price?
An offering price is the per share price of publicly issued securities set by an investment bank during the initial public offering (IPO) process, and at which the shares are available for purchase. As the IPO is a method of capital raising, the offering price is one of the key determinants on how much money a company going through the IPO will be able to raise.
Generally, an underwriting bank considers many factors that can influence the IPO price. For example, an underwriter assesses the current value of a company, as well as its future perspectives. Additionally, the IPO price also incorporates the risk overview of the investment and compensates investors for such risk.
The offering price is generally used to sell all the shares at the offering price to institutional and accredited investors, so most individual investors are unable to purchase an IPO at the offering price. However, all individual investors can buy and sell shares once newly issued securities start trading on an exchange on the first trading day.