Math Behind IPO Allotment | TheWealthWisher (TW2)

An Initial Public Offering or IPO is a process in which a privately held organization makes the firm’s shares available to the general public for purchase. But how are IPO Shares allotted? Why IPO application get rejected and we do not get an allotment? What could be the reason for not getting an IPO allotment?
Let’s check this today.
When a company decides to go public and sell shares through an IPO (Initial Public Offering), people like you and me can apply to buy those shares.
Here’s how the process works:
Applying for IPO Shares
Once a company launches its IPO, people can apply to buy these shares via an online process. This is called IPO bidding. All the applications are collected, and then any invalid ones—like if someone submitted incorrect details—are thrown out. What’s left are the valid applications.
Two Possible Scenarios of IPO Allotment
Demand is Less Than or Equal to Supply: In this case, everyone who applied gets the shares they asked for…
Demand is Greater Than Supply: This is where things get tricky. If more people apply than the number of shares available, the company has to figure out who gets shares and how many. Here’s how they do it:
Case 1: The total number of bids is less than or equal to the number of shares offered
If the total number of bids made by the applicants is less than or equal to the number of shares being offered, then complete allotment of stocks will take place. Thus, every applicant who has applied will be assigned shares.
You will love to read this too  Fall Crash Correction – Market VolatilityWhen there are more applicants than shares, the process gets a bit more complicated:
Slightly More Applicants than Shares: The company will make sure that everyone gets at least one lot (the minimum number of shares you can buy). After that, any extra shares are divided among those who applied for more than one lot.
Case 2: The total number of bids is more than the number of shares offered
If the total number of bids made by the applicants is more than the number of shares being offered, then the allotment process of shares requires more planning. SEBI or Securities and Exchange Board of India mandates that at least one lot should be allotted to every individual who has applied.
Way Too Many Applicants: If the demand is super high, so much so that they can’t even give everyone one lot, then a lottery system kicks in. It’s completely random, so if you’re lucky, your name gets picked, and you get shares. If not, you go home empty-handed. This lottery is done by a computer to keep it fair.
Why Didn’t You Get Any Shares?
If you didn’t get shares, there are usually two reasons:
Your application was invalid (maybe you entered the wrong details or applied more than once).
The IPO was heavily oversubscribed, and unfortunately, your name didn’t come up in the random lottery.
Reason for No Allotment of Shares
There are two reasons why no shares were allotted to you, which are:

Your bid for the IPO was termed invalid due to an incorrect Demat account number, incorrect PAN number, or multiple applications submitted for the IPO.
Your name wasn’t picked out in the lucky draw in the case of a large oversubscription

You will love to read this too  When NOT to Buy Term Insurance PolicyYou can now purchase shares via an IPO and know why you didn’t get any lots allotted if your application is not accepted.
Way out to get more IPO Allotment
There is only one way – increase the number of applications (unique). This can be done by using the demats of various family members.
Other things like applying with correct details, UPI ID & approving ASBA via the UPI app are also to be taken care of.