Oversubscribed

What is 'Oversubscribed'

Oversubscribed is a situation in which the demand for an initial public offering (IPO) of securities exceeds the total number of shares issued. An oversubscribed IPO is one where there are more buyers than issued shares. It is generally expressed in terms of a multiple, such as "ABC IPO oversubscribed two times," meaning there is a demand for two times the number of shares that will be issued.

Ideally, the security's price will be set at the exact price at which all the issued shares can be sold to investors so there is neither a shortage nor a surplus of securities. In the event there is more demand for a public offering than there is supply (creating a shortage), a higher price could have been charged and the issuer could have raised more capital.

BREAKING DOWN 'Oversubscribed'

For example, analysts in early 2012 indicated that the long awaited Facebook IPO, seeking to raise about $10.6 billion by selling more than 337 million shares at $28 to $35 per share, was already oversubscribed. Investor interest leading up to the May 18, 2012 IPO showed that there was demand for more shares than Facebook would make available, leading to the possibility of an oversubscribed situation.

RELATED TERMS
  1. Hot IPO

    An initial public offering that appeals to many investors and ...
  2. Pot Is Clean

    A slang phrase referring to a situation in which an underwriter ...
  3. Undersubscribed

    A situation in which the demand for an initial public offering ...
  4. Share Capital

    Funds raised by issuing shares in return for cash or other considerations. ...
  5. Issued Shares

    The number of authorized shares that is sold to and held by the ...
  6. Break Issue

    A type of stock initial public offering (IPO) that trades below ...
Related Articles
  1. Investing

    What are Issued Shares?

    Issued shares are the amount of authorized stocks a company’s shareholders buy and own. The annual report shows the number of outstanding shares.
  2. Markets

    If You Had Invested Right After Facebook's IPO (FB, TWTR)

    Find out more about how much you would have made if you invested $1,000 into Facebook Incorporated right after its initial public offering.
  3. Investing

    How An IPO Is Valued

    The process of determining a company’s initial share price includes quantitative and qualitative components.
  4. Investing

    What Does an Underwriter Do?

    In the investment world, an underwriter is a company that helps corporations or other issuing bodies distribute their securities.
  5. Investing

    How Does Dilution Work?

    Dilution refers to the reduction in the percentage equity ownership of a company due to additional equity being issued to other owners.
  6. Investing

    The Basics Of Outstanding Shares And The Float

    We go over different types of shares and what investors need to know about them.
  7. Investing

    What's Share Capital?

    Share capital, also called equity financing, is the total amount of money and property a company has received for selling its shares to shareholders.
  8. Investing

    How An IPO Is Valued

    The initial valuation of an IPO can determine the success or failure of a specific stock - but how is that price determined?
  9. Markets

    The Weighted Average Of Outstanding Shares

    The quantity of a company’s outstanding shares changes when it issues new shares, repurchases or retires existing ones, or converts others.
  10. Markets

    Understanding Rights Issues

    Not sure what to do if a company invites you to buy more shares at discount? Here are some of your options.
RELATED FAQS
  1. How does an IPO get valued? What are some good methods for analyzing IPOs?

    The price of a financial asset traded on the market is set by the forces of supply and demand. Newly issued stocks are no ... Read Answer >>
  2. How does an underwriter syndicate work together on an initial public offering (IPO)?

    Learn how underwriting syndicates work together when helping a company undertake an initial public offering, and learn about ... Read Answer >>
  3. What are the different types of IPO issued?

    Learn about the two ways for a company to go public: fixed price and book building. Under fixed price, the share price is ... Read Answer >>
  4. What is the difference between issued share capital and subscribed share capital?

    Find out about the difference between subscribed share capital and issued share capital, including an explanation of the ... Read Answer >>
  5. Why would I need to know how many outstanding shares the shareholders have?

    Find out why shareholders should know how many outstanding shares have been issued by a corporation, and learn what happens ... Read Answer >>
  6. What is the difference between an IPO and a seasoned issue?

    Learn how companies issue IPO securities when they first go public and seasoned issue shares if they sell more shares in ... Read Answer >>
Hot Definitions
  1. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  2. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  3. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  4. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  5. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  6. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
Trading Center