Definition of Oversubscribed

What does the term "oversubscribed" mean? What is meant by the term "oversubscribed" when talking about initial public offerings?

When a company goes public, they sell shares of themselves to investors.

Underwriters help companies go public. One of the primary roles of an underwriter is to find investors for the offering.

Underwriters need to do the fine dance of balancing supply with demand. Underwriters need to price an offering so that all of the available shares are sold without leaving too much demand on the table.

If an issue is "oversubscribed", then that means that investors haven't been able to buy as many shares in the offering as they would have liked. This means that an offering should have been priced higher in order to match the strong demand.

Companies sell shares in themselves in order to raise capital. They don't like hearing that their offering was "oversubscribed", because then it means that they could have sold their shares at a higher price and raised more money for themselves.

Underwriters have the option of raising the price of the offering in cases where demand exceeds supply. Companies and underwriters also have the option of increasing the size of the offering.


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