Allotment
IPO Allotment is the process of giving shares to investors after the IPO application period closes.
IPO Allotment is the stage where the company decides how many shares each investor will receive after people have applied for an IPO. Since the number of applicants is often higher than the shares available, not everyone gets the shares they applied for.
If the IPO is oversubscribed (more demand than shares), the allotment becomes important. Shares are distributed based on certain rules:
In many cases, shares are given in a proportionate (pro-rata) manner.
For retail investors, a lottery system may be used to ensure fair distribution.
If an investor does not get any shares, the blocked or paid amount is returned/refunded. If shares are allotted, they are credited to the investor’s demat account, making them a shareholder of the company.
Example: Suppose a company offers 1 lakh shares, but investors apply for 10 lakh shares. This means the IPO is 10 times oversubscribed. So, not every investor will get shares, and allotment will be done either proportionally or through a lottery system. |