What is allocation?

How does allocation work?

The actual number of allocated shares depends on supply and demand. Because of the sheer number of investors, top-ranking underwriters can only satisfy a fraction of the brokerage application. In fact, often the amount of the collective application exceeds the volume of the entire allotment. Clients may therefore receive shares for less than the amount specified in the order, and this is normal. Of course, payment is only made for the shares actually bought. The remaining money is immediately returned to the client's account.

Amount of allocation

The ratio between the value of the purchased shares and the amount of the submitted order is called the allocation. Often, allocations range from just 1 to 5% and in some placements from 10 to 100%.