What is IPO allocation?
IPO allocation is the way that shares offering shares through initial public offers decide which investors will receive shares and what the price of these shares will be. This is necessary if the number of shares offered is less than the number of offers received for stocks. There are several different methods that the company can use to allocate IPO. Among them is the main method of a fixed price in which the stock price is known in advance, the Dutch auction method that allocates the shares based on the offer prices, and the method of creating books that determine the price after visiting all offers in a particular price range. However, there are also newer companies that want to reach the stock market for the first time. To do this, they must have an initial public offer or IPO that will make their shares available to public investors. Determining how much Shares will be given to each investor and at what price she is known as IPO allocation.
CitizenS is the allocation of IPO simply the question of sales of shares on the basis of a predetermined price agreed by the company and the subscriber, which is usually a large brokerage company that offers an offer. This fixed price method is particularly effective if the company does not expect to sell all its shares, which means that shares are insufficiently delivered. If there is more demand than the offer of initial shares, the shares are reportedly rewritten.
In the method of creating books allocation IPO Investors do not know what the price of shares of shares will be when it offers. Instead, they are asked to offer shares on a certain price range. The company and the subscriber then use the offers to come up with the price that best suits IPO. Investors who submitted offered shares for this price, which could differ from their initial bid price.
For the Dutch auction method, the IPO allocation is based on the price of offers. Imagine, for example, that there are 200 shares offered. 200 earsAzece, who made the highest offers, would all acquire shares and the price would be set for the lowest offer of these 200 TOP 200. It is clear that there may be applicants who want more shares but do not have to get them all. If in this example there was a person who submitted an offer for 10 shares for 196. The highest bid price would only receive five of its required shares, because another five would exceed 200 available.