Differences between Oversubscription and Under subscription of Shares
|
Basis |
Oversubscription of Shares |
Undersubscription of Shares |
|---|---|---|
| Meaning | When the application received for shares exceeds the actual shares offered. | When the actual shares offered exceed the application received for shares. |
| Impacts |
High demand leads to:
|
Low demand leads to:
|
| Customer Experience | Potential buyers have to wait for the allotment of shares and may face the decline of applications or pro-rata allotment. | If the company does not receive at least 90% of the amount which they intend to sell, the whole issuing drive got cancelled. |
| Refunds | Refunds are being made for excess applications received. | Refund situations arise in the case when the company does not receive at least 90% of the amount it wishes to sell. |
| Minimum subscription | No questions of minimum subscription arise in this case. | Company sets a bar for minimum subscriptions to be made under such conditions. |
| Investors’ Mindset | Investors have a positive image of the company in mind, hence over subscription arises. | Under subscription arises due to a negative image in the mind of investors regarding the company. |
Difference between Oversubscription and Undersubscription
Any company in order to raise capital, issues shares in various forms like Equity shares, preference shares, etc. When any private company first issues the shares to the general public, it is known as an Initial Public offer (IPO). The general public and various investors send applications to the company in order to buy shares directly from the company. On the basis of applications received by the company from the general public and various kinds of investors, subscription of shares can be divided into two main categories: Oversubscription of Shares and Undersubscription of shares. Oversubscription of Shares is when applications received for the shares exceed the actual shares offered by the company whereas Undersubscription of Shares is when shares offered by the company exceed the applications received to buy the shares.