When an IPO is oversubscribed, it means that the demand for shares exceeds the available supply. In such cases, the following outcomes are possible:
1. Pro-rata allocation: The company may allocate shares to investors on a pro-rata basis. This means that each investor will receive a portion of the shares they requested, based on the overall demand and the total number of available shares. For example, if you requested 100 shares and the oversubscription rate is 50%, you may be allocated 50 shares.
2. Increased offering size: In some cases, the company may choose to increase the number of shares offered to meet the demand. However, this is less common and depends on the company's discretion.
It's important to note that the specific allocation method in an oversubscribed IPO can vary depending on the underwriters and the company's decision. The allocation process aims to distribute shares fairly among interested investors while considering the overall demand and available supply.
When participating in an oversubscribed IPO, there is no guarantee of receiving the full requested allocation, and the final allocation may be adjusted based on the oversubscription rate and the company's allocation methodology.