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A situation in which investors show so much interest in a new issue of a security that demand exceeds supply. Before a new issue, underwriters canvass potential investors, who may or may not book an order to buy a portion the new issue. If investors order more shares than there are shares being issued, the security is said to be oversubscribed. This may affect the price when the security is actually issued.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved


1. Or, relating to, or being a new security issue for which there are more requests to purchase securities than are securities available for sale. For example, brokers may take a sufficient number of preliminary orders for a new issue of stock for which there are insufficient shares available to satisfy the demand. Also called overbooked.
2. Of, relating to, or being a buyback or takeover attempt in which more securities are offered than the purchaser has agreed to buy. In such a case the purchaser may decide to buy the additional securities or may buy the agreed-upon number on a pro rata basis.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.


An initial public offering (IPO) is oversubscribed when investor demand for the shares is greater than the number of shares being issued.

What typically happens is that the share price climbs, sometimes dramatically, as trading begins in the secondary market, though the price may drop back closer to the offering price after a period of active trading.

The group of investment banks, known as a syndicate, that underwrites a hot IPO may have an agreement, known as a green shoe clause, with the issuing company to sell additional shares at the same offering price.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
'We know overbooking has a bad reputation,' De Juniac acknowledged, while adding that the industry has since evolved and has grown more sophisticated.
The specialized Spanish dictionary DTUR includes the English term OVERBOOKING, as well as its Spanish equivalent SOBRECONTRATACION, and defines it as "exceso de contratacion o admision de un numero de reservas mayor que el de plazas disponibles".
In the previous researches on overbooking problem, the arrival rate of customers is an important element and is usually assumed to be a random variable, and probability theory plays a great important character in the optimization of the overbooking strategy.
She denied Aer Lingus overbook flights by 10% and added overbooking was "standard" practice.
In the aviation business, overbooking is not illegal and is a common commercial practice among airlines.
Promises featured in the Care-antee include: not charging for call centre bookings; not overbooking flights; not charging for two checked bags; having the lowest fees for changing, cancelling and pre-reserving seats in Canada; accommodating passengers if flights are delayed; publishing on-time, lost baggage and cancellation rates; providing free online check-in and seat selection 24 hours prior to departure; allowing passengers to transfer credit files to friends or family without charge; and providing free in-flight snacks and refreshments.
Changes in airline policies following the 9/11 terrorist attacks have greatly diminished overbooking of flights, benefiting both airlines and customers.
These mainly concern rights guaranteed by Regulation 261/2004 on overbooking, delays and cancellation of flights.
Royal Dutch Shell yesterday agreed to pay EUR352.6 million (pounds 179 million) to non-US investors as it seeks to put behind it the reserves overbooking scandal that rocked the oil giant in 2004.
It does not intend to revise, at least in the short term, the existing regulation 261/2004 defining rights in cases of cancellation, overbooking or long delays, but it does not exclude the possibility of doing so if the situation fails to improve.
Regular air travellers will say the rules are long overdue, with overbooking a particular source of annoyance, and will hope the days of having to spend the night on an airport bench have gone for good.