IPO allotment operates by assigning shares to customers associated with their Demat account, typically within one week after the subscription period ends. It is a process of offering shares to the public for private companies. When the data is collected, the final price is based on the bid price the investors give. If the issued price exceeds your bid price, an investor will not get the allotment.
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1. IPO Overscription
It is a term used when the demand for the new stock issue is greater than the number of shares an IPO applied for more than the total number of shares on offer. Basically, when investors invest in a new company, they may offer more money than the company is already prepared to accept. This is a sign of an investor’s interest and confidence in the company’s potential.
2. Computerised lottery
A computer-based lottery is generated to receive shares and give equal chances to each applicant. It is the lottery where the winners get a maximum of one lot of shares. You can also opt for any online stock market courses in order to learn more about the intricacies of the stock market.
3. Invalid Application
An invalid application is rejected due to technical issues, or some wrong information will be filled out, or you will submit the wrong application form. If the application is invalid, the investor will not receive any information. It can be rejected due to any reason, such as an invalid PAN card, bank records, etc.
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Some common reasons for rejection:
Multiple applications with the same PAN card
Submitting more than one application with the same PAN card number is the one common reason for rejection. You can only submit one application with the same PAN number, bank account name . Multiple applications with the same PAN number will not be eligible for allotment which means that investors can not submit for multiple applications for the same process .
Incorrect or Invalid Application Details
Accidentally filling in the incorrect information and invalid details on the application form.
Name Mismatch on the Bank account and PAN
A mismatched name between your PAN cards and bank details. If your application is considered invalid, you won’t receive an allotment.
4. Bid Price Lower Than Financial Issues Price
In a book-building IPO, you choose the price you are willing to pay within the given range. If the price range is 600-630, you can bid at any price within that range. If your bid price is lower than the final issue price, your application won’t allow for allotment.
Here is how you can make sure to get an IPO allotment:
Fill out the IPO form carefully to avoid rejection due to incorrect information.
1. SBI treats all retail applications under two lakhs equally. Only one lot is allowed per person if selected in the lottery.
2. Using multiple Demat Accounts with your family and friends can increase your chances in the lottery since each account is treated separately.
3. The IPO allotment is made by the registrar in consultation with the stock exchange.
4. The cut-off is the price that the company decides during the off-price book-building process. if you bid at the cut you’re willing to pay the price the company decides.
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lConclusion:
The allotment of shares is the company’s issuing of new shares to the public at large, who are original or existing shareholders. The main confusion among the public lies between the issues of shares and the allotment of shares. Before you invest, make sure you study business and understand the fact of raising money from the public. Once you clear the concept and apply for IPO, keep the points in mind.