Stocks generally don't trade on purely quantitative analysis, but on investor assessments of their 'story' and how that will play out over time. If you think c

Stocks generally don't trade on purely quantitative analysis, but on investor assessments of their 'story' and how that will play out over time. If you think corporations are going to invest in networking gear you look at Cisco et al. You inspect that universe for management (good or bad?) / product (great? promising new stuff? obsoleting?) / financial stories (leverage? balance sheet clarity?), and for valuation (P / E, enterprise value to EBITDA). If you think someone's valuation is low given the stories you believe, you buy. For seasoned stocks a market consensus about the relevant stories emerge, and events within those stories drive the trading moves. People making money by being the first to adopt or drop stories. But an IPO has no market-consensus stories of its own. So the book-building process involves explaining the company and getting market feedback on the credibility of that story. Now this may or may not make sense. But it does give management some feeling of relationship with the market, by which they can hear what investors think and possibly influence those perceptions. Given the importance of stock price to most managements, it would be a very bold team that went forward without any perceived tool for managing the process.