A situation in which the demand for an initial public offering of securities is less than the number of shares issued. Also known as an "underbooking".

Typically, the goal of a public offering is to price the security issue at the exact price at which all the issued shares can be sold to investors, so there will be neither a shortage nor a surplus of securities. If there is more demand for a public offering than there is supply (shortage), it means a higher price could have been charged and the issuer could have raised more capital. On the other hand, if the price is too high, not enough investors will subscribe to the issue and the underwriting company will be left with shares it either cannot sell or must sell at a reduced price, incurring a loss. Sometimes, when underwriters can't find enough investors to purchase IPO shares, they are forced to purchase the shares that could not be sold to the public (also known as "eating stock").

Investment dictionary. . 2012.

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  • undersubscribed — un‧der‧sub‧scribed [ˌʌndəsəbˈskraɪbd◂ ǁ dər ] adjective FINANCE a share or bond issue (= when they are made available for sale) is undersubscribed if people ask for fewer shares etc than are available: • Tender issues that are undersubscribed are …   Financial and business terms

  • undersubscribed — ► ADJECTIVE ▪ (of a course or event) having more places available than applications …   English terms dictionary

  • undersubscribed — un|der|sub|scribed [ˌʌndəsəbˈskraıbd US dər ] adj an activity, sale, service etc that is undersubscribed is not bought or used by enough people ≠ ↑oversubscribed …   Dictionary of contemporary English

  • undersubscribed — un·der·sub·scribed (ŭn dər səb skrībdʹ) adj. Having fewer participants or subscribers than desirable. * * * …   Universalium

  • undersubscribed — adjective Having too few subscribers or subscriptions …   Wiktionary

  • undersubscribed — adjective 1》 (of a course or event) having more places available than applications. 2》 (of a share issue) having fewer applications for shares than there are shares available …   English new terms dictionary

  • undersubscribed — /ˌʌndəsʌb skraɪbd/ adjective referring to a share issue where applications are not made for all the shares on offer, and part of the issue remains with the underwriters …   Dictionary of banking and finance

  • undersubscribed — adj. without sufficient subscribers, participants, etc …   Useful english dictionary

  • undersubscribe — verb (T) be undersubscribed if an activity, sale, service etc is undersubscribed, not many people want it undertake, verb past tense undertook / tUk/ past participle undertaken (T) formal 1 to accept that you are responsible for a piece of work,… …   Longman dictionary of contemporary English

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