Wednesday 23rd January 2002
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A: When a company lists on the NZSE, or any market for that matter, it is usually done in the form of an Initial Public Offering or IPO for short. The company has a paid up capital of only so many shares and often demand is far greater than supply. When this happens there simply are not enough shares to go around. For example, if a company intends to issue one million shares, but investors have applied for two million shares, some people are obviously going to miss out.
Brokers are often given a 'firm allocation' from the organising broker to distribute among their clients. Different brokers have different ways of deciding who gets the shares. Many of them divide their allocation among their largest and most active clients, but some brokers allocate IPOs on a first-come, first-served basis. Try expressing an interest early to your sharebroker and see if they will help ensure an allocation.
The public pool is for everyone and is usually heavily oversubscribed. When this happens, most companies try to allocate a small amount of shares to as many investors as possible. This is fair but means that many investors end up with considerably less shares than they applied for.
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