Price Priority in an Offer for Sale (OFS) is an allocation method in which bids with higher prices receive preference, with the highest bidders receiving shares first. Commonly used for non-retail investors, this approach means investors pay the price they bid rather than a single, uniform clearing price.
Key Factors of Price Priority in OFS:
- Allocation Mechanism:Bids are ranked from highest to lowest. The highest bidders are allotted shares first until the total offering is exhausted.
- Multiple Clearing Price: Unlike a single-price auction, price priority means different investors may pay different prices for the same OFS, depending on their bid.
- Bid Price vs. Cut-off: While retail investors often bid at the "cut-off" (the lowest price at which shares are allotted), non-retail investors using price priority must often bid higher to secure an allocation.
- Non-Retail Focus: This method is typically used for institutional investors, whereas retail investors often get allotments on a proportionate basis at a single cut-off price, or sometimes at their bid price if they choose.
- Example: If an OFS has a floor price of ₹180, investors bidding ₹250 will get priority over those bidding ₹200 or ₹180.
