Book building has been merged as the method of choice for investment by many banks in United States of America. This is done for pricing estimation and selling initial public offerings. In order to calculate the price for new shares accurately, the pooling and pricing method is being applied with standard book building practices (Allen, Faulhaber & Gerald, 1989). The pooling and pricing method in this case enable the issuer to maximise proceeds received from the initial public offering (IPO) and minimizes the fluctuations in the share price immediately after the IPO. An investment can also bundle or pool IPOs by tactically requiring investors to participate in the unattractive IPOs and this lets the IPOs to become more attractive for future offerings (Friesen, and Swift, 2009). Though, the pooling of IPOs successfully depends on the reputation of the bank. Any securities house which works as an agent and is unable to maintain reputation for monitoring diligently may lead to lose the regular investors but it could earn better future returns by pooling the IPOs. Even in the case when the demand for the shares are week in the market, using pooling and price technique, the securities house can sell the issuer’s shares in the market. The large volume of capital is provided for future growth with help of the pool and pricing method by the securities houses who works as an agent in an IPO or bond issue (Goergen, Khurshed & Mudambi, 2007).
This is how the pooling and pricing approach is followed up by the banks that provides loan or by the securities house who works as an agent in an IPO or bond issue.