What does cut-off price mean?

The cut-off price is the designated price at which shares are assigned to investors. It holds a crucial role in determining the right price and assessing demand during a book-building issue, commonly used instead of a fixed price mechanism.

In a book-building scenario, the company outlines a price band or floor price in its prospectus. The final discovered price, falling within this range or exceeding the floor price, is referred to as the ‘Cut-off’ price. This helps in understanding investor demand and aids in setting the most appropriate price for the offering.