Under Subscription is when the demand for shares in an IPO is less than the number of shares offered in an IPO.
Undersubscription takes place when the number of applications from investors is less than the total number of shares the company intends to issue.
Several factors affect the underwriting of an IPO, such as a lack of investor interest in the stock, poor financial performance of the company, or a downturn in the stock market. These factors can result in an IPO not being fully subscribed as investors are not willing to participate. The underwriters and the issuing company then decide whether to cancel or postpone the IPO.
For Example, A company offers 20 lakh shares in an IPO and receives bids for 10 lakh shares. In this case, the IPO has received fewer bids/applications or investors are showing less interest in this IPO.
Answered on
