When firms opt for public funding, they issue shares through an Initial Public Offering (IPO). These shares are much sought after by both individual and institutional investors, although the supply is normally out-competed by the demand. This makes IPO allotment a competitive one. There are some steps behind increasing your chances of allotment in an IPO. There is also some way behind how to analyze the IPO live subscription status which will be significant for making proper decisions.
Understanding IPO Allotment
IPO allotment is the final Book Building process, by which securities are allocated to the applicants after closure of the IPO subscription. When people want to make an investment, they apply for shares, but if an IPO is fully subscribed more people apply than there are shares in the issue, not all these people get exactly the number of shares they applied for. In such situations, the shares are offered through a raffle system or according to the proportion of the aspects.
1. Apply Early and Correctly
Applying as early as possible is one of the easiest ways of improving your chances of being awarded an IPO allotment. It is common practice that most investors wait until the last day of the subscription period. However, applying early means your application will be among the first to be acted on. Ensure that you provide all the right information and prove your application in the field provided. Failure to complete these forms could be a basis for disqualification from the allotment.
2. Use Multiple Demat Accounts
It is advised to open different Dematerialisation accounts in different names since these accounts are linked to your identification details. For instance, you should be able to file through accounts in the names of the family members. But ensure that each of them is for the minimum lot size because when you apply for several lots from the same account, the probability of getting an allotment may reduce.
3. Check IPO Live Subscription Data
Monitoring the IPO live subscription status is a crucial step in deciding your investment strategy. The subscription data shows how many times the IPO has been subscribed to by various categories of investors. For example, as retail investors, institutional investors, and high-net-worth individuals. If an IPO is highly oversubscribed, you may want to adjust your strategy by applying for the minimum lot size to maximize your chances. On the other hand, if the subscription is low, you may consider applying for more shares.
Conclusion
The process of obtaining an IPO allotment is not easy, particularly so when the IPO is actually oversubscribed most of the time. Nevertheless, there are certain ways by which one can — Apply early in the day, use multiple Demat account, Apply in small lots. Also, tracking IPO live subscription data will enable one to decide on whether to apply for more shares or just remain with the minimum lot size. While some of these strategies are not going to make you the IPO King, they will certainly increase your odds of acquiring shares in the volatile IPO market.
