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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.


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.


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.

References in periodicals archive ?
In a bid to deter airlines from deliberately overbooking flights and to limit delays, the European Union in 2005 created more compensation rights for air passengers who are unable to board their planes because of overbooking, cancellations or flight delays.
The minister said yesterday (27 December), after a two-hour meeting with civil aviation authorities and other officials, that it is impossible to tolerate overbooking by any airline, Reuters reported.
The new rules offer greater compensation for cancellations, delays and overbooking by airlines.
Travellers who cannot board flights due to cancellation or overbooking can claim up to pounds 415 - even if they paid only a fraction of that for the ticket.
Many voiced their disapproval at a pounds 1m pay-off to Sir Philip after his role in overbooking reserves.
At the meeting, 10% of investors voted against Shell's remuneration package for directors - which included a pounds 1m pay-off to chairman Sir Philip Watts after his role in overbooking oil and gas reserves.
Travellers whose holidays and business trips are ruined or delayed by overbooking and unnecessarily cancelled flights could receive compensation after the European Parliament backed plans drawn up by British Labour MEPs.
EUROPEAN Union ministers and the European Parliament have agreed on rules for when -and how much -airlines have to compensate passeng ers for overbooking or delayed or can-celled flights.
Under proposed EU rules, passengers unable to board flights because of overbooking or cancellation would be given greatly enhanced rights to cash compensation.
Department of Transportation received more than 120,000 complaints about mishandled baggage during a one-month period, and more than 22,000 complaints from passengers who missed flights due to overbooking during a nine-month period.
SOME European airlines said recently that they were going to resort to overbooking to help guarantee revenues.