IPO Allotment: Are you also not getting IPO Allotment? Are you making these mistakes?

Any company has to launch IPOs in the primary market before entering the stock market. In the primary market, transactions take place between two people. These include the company and the investor. The company works to raise funds for itself through IPO.

Many times it happens that we apply for IPO, but we always have to return empty handed. But why does this happen? The reason for this is oversubscription.

What is an oversubscription?

The situation of oversubscription arises when more people want to buy the company than the number of shares it has issued. In such a situation, there is confusion as to who should be given the shares.

In such a situation, the registrar uses the lottery process to allot shares.

Through this, an attempt is made that there is no discrimination against any investor.

Understand the whole process with an example.

Let us now understand through an example how a company allots an IPO. Let us assume that a company has launched an IPO. For this, 10 investors have applied at the cut-off price.

These investors have demanded to buy about 1 to 5 shares. However, only 29 shares have been issued by the company so far. This situation is called oversubscription.

Now the registrar will decide through the lottery process to whom these shares should be allotted. Under this, it is decided that investors 4,5,6,7,8,1,2 will be allotted 1 share each. The rest will not get anything.

Keep in mind that when you are buying shares under IPO, buy them at the cut-off price or more than that. If you do not do this, you will not be included in the lottery.

Difference between shares and IPO?

No company directly enters the Secondary Market. It first has to launch IPOs in the primary market. These IPOs are a kind of shares. Which are bought by investors. In the primary market, transactions take place between the investor and the company. After which these shares get listed in the stock exchanges BSE and NSE and their trading starts.

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