— Kishore V, SME and ACW at Edumarz.
The company sells shares to the general public, allowing them to own a piece of the company.
The following are two situations involving the issuance of shares:
1. Shares are oversubscribed.
2. If you want to subscribe for shares, go to Subscription of Shares.
Oversubscription occurs when a corporation receives more applications from potential stock purchasers than the number of shares made available to the general public.
The term “under subscription” refers to when the number of shares applied for by the public is fewer than the number of shares issued by the corporation.
Under-subscription will be a problem for new businesses or those with a bad reputation.
The following are some distinctions between oversubscription and under subscription of shares.
Over Subscription of Shares | Under-subscription of Shares |
Definition | |
Oversubscription occurs when a firm receives more applications from share purchasers than the number of shares put available for public purchase. | When the number of shares sought for by the public is fewer than the number of shares issued by the firm, it is referred to as under subscription. |
Number of Applications received | |
The number of applications received outnumbers the number of shares available. | The number of applications received is less than the shares issued |
Acceptance Rate | |
All of the petitions will be denied, and the shares will be distributed pro-rata. | There has been a full allotment, which means that all of the applications for shares have been approved. |
Equality of Subscribed and Issued Capital | |
The number of issued capital and subscribed capital is the same. | The issued capital exceeds the subscribed capital. |
Pro-rata allotment | |
In the event of an oversubscription of shares, a pro-rata allocation is made. | In the event of an under-subscription of shares, there will be no pro-rata allocation. |
Money Refund | |
If the application is refused, the money is reimbursed. | There will be no requirement for a refund in this case. |