A company doesn't have to set a price for its new shares. It can invite investors to apply for shares at a price which they are willing to pay.
When all the applications are in, the company works out the 'striking price' - the highest price which will enable all the shares to be sold. Anyone who made a bid at or above the striking price gets shares at the striking price even if their bid was higher. Anyone who made a bid below the striking price gets nothing.
An offer by tender is similar to an auction with sealed bids and, like an auction, there is often a reserve price.
New shares are sold to the large fund managers by the company's broker at an agreed price. Private investors don't get invited to the flotation party, but can subsequently buy the shares in the secondary market.
No new shares are issued. Instead, old shares that were in private hands are sold to fund managers. Other investors who want to hold the shares have to buy them on the secondary market.
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