DEFINITION of 'Oversubscribed'

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.

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  1. How does an underwriter syndicate work together on an initial public offering (IPO)?

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    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 Full Answer >>
  3. Can mutual funds invest in IPOs?

    Mutual funds can invest in initial public offerings (IPOS). However, most mutual funds have bylaws that prevent them from ... Read Full Answer >>
  4. How does investment banking differ from commercial banking?

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  5. What kind of assets can be traded on a secondary market?

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  6. Why would a company decide to utilize H-shares over A-shares in its IPO?

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