Other Considerations
Under- and Oversubscribed Offerings
- An undersubscribed offering is one in which the entire issue is not sold; often caused by the market price of the stock falling below its subscription price
- To protect against undersubscription, the company and its investment banker can negotiate a standby arrangement, which stipulates that any unsold shares will be purchased by the investment banker
- Most rights offerings have an oversubscription privilege, which allow shares not sold through the exercise of rights to be sold to interested shareholders on a pro-rata basis
- 1994, HarperCollins Publishers