ABB Execution Manual — 12 Hours After Market Close
ABB is the fastest deal in capital markets. Market close → mandate → IOI → pricing → done before open. Hour-by-hour process, IOI Tracker structure, discount decision logic, hedge fund vs long-only allocation strategy. ARM (2023), Samsung C&T, SK Hynix block trade cases.
Ch.1
30-Second Summary — ABB Key Numbers
An ABB (Accelerated Book-Build) is the fastest ECM execution method. It completes a large-scale share sale within 12–24 hours after market close. If an IPO is an 18-month project, an ABB is an overnight sprint.
12 – 24h
Timeline
3 – 5%
Discount
$200M+
Min Deal Size
2 – 4h
IOI → Pricing
Ch.2
What Is ABB — The Fastest ECM Deal
An ABB is an ECM transaction that sells a large block of shares to institutional investors overnight. It is primarily used when a PE fund exits a portfolio company stake or when a major shareholder monetizes part of their position. Unlike traditional IPOs or rights issues, there is no formal prospectus or roadshow — only a one-page Teaser and the bank's investor network.
The discount is the price of speed. Investors take on the risk of deciding within 12 hours, in exchange for receiving shares at 3–5% below market price. The issuer sacrifices the time premium but secures cash quickly.
Analogy
ABB vs IPO vs Rights Issue — Key Comparison
| Metric | ABB | IPO | Rights Issue |
|---|---|---|---|
| Timeline | 12–24 hours | 6–18 months | 4–6 weeks |
| Discount | 3–5% | 0–5% NIC | 20–40% |
| Documentation | 1-page Teaser | S-1 (hundreds of pages) | Prospectus |
| # of Investors | 30–80 accounts | Hundreds to thousands | Existing shareholders |
| Purpose | PE exit · Quick raise | First listing · Capital raise | Shareholder protection · Large raise |
Ch.3
ABB Hour-by-Hour Execution Process
From Hour 0 (market close) to Hour 12 (next day's open) — a step-by-step dissection of what happens at each stage.
- Issuer (or major shareholder) → notifies bank of deal intent
- Confidentiality Agreement (CA) executed
- Preliminary discussion on deal size and price range
- Internal bank approval (risk committee, etc.)
- Deal Team formed: sector sales + traders
- Target investor list compiled (typically 30–80 accounts)
- Teaser (1-page deal summary) drafted
- Individual outreach to institutional investors (phone + email)
- Deal structure, price range, and lock-up terms explained
- IOI (Indication of Interest) collection begins
- IOI Tracker updated (investor name, size, price condition)
- Coverage calculated: current demand ÷ deal size
- Bank → Issuer demand status briefing
- Demand ≥1.5× → proceed to pricing
- Demand <1× → consider price cut or postponement
- Final price = market price − discount
- Issuer board / CFO final sign-off
- Per-investor allocation calculated (pro-rata to demand)
- Underwriting agreement signed
- Exchange disclosure filed (mandatory before market open)
- New or existing shares sold — deal settled
- Stabilization monitoring begins (greenshoe if needed)
IOI Tracker Structure — Real Spreadsheet Columns
01
Investor Name
02
Account Type
03
IOI Amount
04
Price Condition (CAP)
05
Final Allocation
06
Actual Settlement
07
Coverage Sales
Updated in real time during demand aggregation (Hour 6–8). Once coverage multiple (= total IOI ÷ deal size) reaches 1.5×, move to Pricing.
Ch.4
Discount Rate Logic — 5 Determining Factors
ABB discount is not a negotiation — it's a function of the market. It's not set arbitrarily by the bank; five factors interact to determine it: deal size, liquidity, market conditions, issuer brand, and demand strength.
Example: for a Samsung block deal, ADTV exceeds $1B, so a 1–2% discount fills demand easily. By contrast, a mid-cap block with $5M ADTV needs 5–8% discount because investors will struggle to exit afterward.
Deal Size (vs. Market Cap)
Deal >5% of market cap widens discount — market absorption burden
Stock Liquidity (ADTV)
Lower ADTV → wider discount — investors struggle to exit afterward
Market Conditions (VIX)
Higher VIX → wider discount — uncertainty demands higher risk premium
Issuer Credit / Brand
Blue-chip issuers can price with smaller discount — investor confidence and liquidity assured
Competitive Demand (Order Strength)
Strong demand → narrow discount — issuer gains pricing power when oversubscribed
Discount Rate vs Coverage Multiple — 5 Case Comparison
Samsung (ADTV $1B+)
Coverage 4.2×
Global Large-Cap
Coverage 3×
Standard Large-Cap
Coverage 2.1×
Mid-Cap Block
Coverage 1.5×
Illiquid Mid-Cap
Coverage 1.1×
← Discount rate (%) / right: demand coverage multiple
Ch.5
Hedge Fund vs Long-Only — Allocation Strategy
The core ABB allocation dilemma: hedge funds (HF) fill demand quickly but may sell heavily on Day 1, pressuring the stock. Long-only institutions (LO) support price stability but may not provide sufficient demand on their own.
The industry default is LO 70% + HF 30%. When oversubscribed (demand > deal size), HF allocations are scaled down to increase LO share. For large deals, a short-term lock-up may be required from some HFs.
Long-Only (LO)
Pros
Price stability, long-term hold, brand value protection
Cons
May struggle to fill deal if demand is thin
Hedge Fund (HF)
Pros
Fills demand, increases deal completion probability
Cons
First-day selling may pressure the stock
Analogy
Ch.6
3 Global Case Studies
Two successes and one failure — how ABBs work and how they break down, confirmed through real deals.
ARM Holdings $10B Block (2023)
SoftBank's staged stake sale. 11 MLAs completed execution in 12 hours. Cornerstone anchor effect drove 3× oversubscription.
Blue-chip issuer + multi-bank structure + cornerstone anchor placement is the formula for minimizing ABB discount.
Samsung C&T Block Trade
PE fund stake exit. Korea's typical 6am deal — timed to overlap with late US session, maximizing global institutional participation.
Korea ABB specifics: 6am pricing → disclosure before 9am open. Timed to allow simultaneous US/Europe institutional participation.
Snap Inc. Block (2022)
Block attempted during stock decline → investors demanded 8% discount → issuer refused → deal pulled. The choice when the market won't bite.
Core ABB risk: when market conditions are poor, the bank must widen the discount — if the issuer refuses, there's no option but to pull. The pull itself is an IR blow.
Ch.7
ABB Failure Scenarios and Responses
ABBs fail as fast as they execute. When demand falls short, a leak occurs, or a contract violation surfaces, both the bank and issuer face hard choices.
3 Primary Failure Causes
Demand < 1×
Order book not filled — deep price cut or cancellation required
Information Leak
Stock drops before execution — legal investigation and liability risk
Within Lock-up Period
Violates existing lock-up agreement → bank liability and potential investor lawsuit
Response Options
✂️
Reduce deal size
⬇️
Lower price (extra discount)
📅
Postpone (retry another day)
🚫
Cancel (accept IR damage)
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Frequently Asked Questions
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