Imagine a company rang it’s bell of IPO and after the IPO period is over and the estimated shares were not subscribed, will the IPO period be extended
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Imagine a company rang it’s bell of IPO and after the IPO period is over and the estimated shares were not subscribed, will the IPO period be extended
If an IPO is oversubscribed, it means investors applied for more shares than the company offered. For example, if a company offers 1 billion shares at ₦10 each, its target is ₦10 billion. If investors apply for 1.5 billion shares (₦15 billion), the IPO is 150% subscribed. In that case, investors mayRead more
If an IPO is oversubscribed, it means investors applied for more shares than the company offered.
For example, if a company offers 1 billion shares at ₦10 each, its target is ₦10 billion. If investors apply for 1.5 billion shares (₦15 billion), the IPO is 150% subscribed. In that case, investors may not receive all the shares they applied for; the shares are allocated according to the rules of the offer.
On the other hand, if the IPO closes and the estimated shares are not fully subscribed, it is called an under-subscription. For example, if the company offers 1 billion shares but investors only apply for 600 million, it has only achieved 60% subscription.
The IPO does not automatically get extended just because it is under-subscribed. Whether the offer can be extended depends on the terms of the offer and the applicable regulatory rules. The company may extend the offer if permitted, rely on an underwriter to take up the remaining shares if there is an underwriting arrangement, or close the offer with only the amount subscribed. If the required minimum subscription is not achieved, the offer may have to be withdrawn and investors’ money returned, depending on the offer terms.
So, simply put: oversubscription means there is more demand than shares available, while under-subscription means there is less demand than the shares offered.
See lessOnce upon a time in the bustling marketplace of Oshodi, Mama Ngozi set up her tomato stall, ready to sell her fresh, ripe tomatoes to the eager customers. It was a sunny day, and the market was filled with the sounds of bargaining, laughter, and the enticing smells of various goods being sold.Now, iRead more
Once upon a time in the bustling marketplace of Oshodi, Mama Ngozi set up her tomato stall, ready to sell her fresh, ripe tomatoes to the eager customers. It was a sunny day, and the market was filled with the sounds of bargaining, laughter, and the enticing smells of various goods being sold.
Now, imagine a big company, let’s call it ABC Delicious Tomatoes, deciding to sell its shares to the public for the first time. This is called an Initial Public Offering (IPO), where the company offers its shares to investors to raise money for its business.
During the IPO period, investors show interest in buying shares of ABC Delicious Tomatoes. If there is high demand for the shares and more investors want to buy than there are shares available, the IPO is said to be oversubscribed. It’s like when Mama Ngozi’s tomatoes are so delicious and in demand that customers line up to buy, but she only has a limited supply.
Now, if an IPO is oversubscribed, it means that there is more demand for the shares than the company initially planned for. In this case, the IPO can be closed earlier than expected, even if the original period is not over. The company may decide not to extend the IPO period because they already have enough investors willing to buy the shares.
In some cases, the company may choose to allocate shares based on certain criteria, such as giving priority to institutional investors or existing shareholders. This is to ensure a fair distribution of shares among interested investors.
So, in summary, if a company’s IPO is oversubscribed, it means there is high demand for the shares, and the company may close the IPO early without extending the period. It’s like when Mama Ngozi’s tomatoes are so popular that she sells out before the market day ends, satisfying the eager customers who wanted a taste of her delicious tomatoes.
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