Oversubscription

Occurs when demand for shares exceeds the supply or number of shares offered for sale. Oversubscription can happen in any market where the available supply of new securities is limited, but it is most often related to the sale of newly minted shares in the secondary market through an IPO. Demand exceeds the total number of shares issued the IPO-ing company. The degree of oversubscription is written as a multiple, such as “JKL IPO oversubscribed two times.” A multiple of two would mean there is twice the demand for shares compared to what is available in the scheduled issue. When this happens, underwriters or other financial entities can increase the price or offer more securities to reflect the demand that is higher than what was anticipated.

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