Definition
Cut-back (Anchor)
A cut-back is the scaling down of an anchor investor's allotment when demand from anchors exceeds the available anchor portion.
When the anchor book is oversubscribed, the merchant bankers allot shares on a discretionary or proportionate basis, cutting back the amounts each anchor bid for. The final anchor allotment, the price and the allottee list are disclosed before the public issue opens.
Because the anchor allocation is carved out of the QIB portion, a strong anchor book reduces the QIB shares available to other institutions in the main issue. Anchor allotments are subject to the staggered anchor lock-in.
Related terms
- Qualified Institutional Buyer (QIB)A QIB is a large, sophisticated institutional investor — such as a mutual fund, bank, insurer or FPI — that is allotted a dedicated portion of an IPO.
- Anchor InvestorAnchor investors are large institutional investors who are allotted IPO shares a day before the issue opens to the public, lending credibility to the offering.
- Anchor Lock-inAnchor lock-in is the mandatory period for which anchor investors must hold their IPO shares before they can sell.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.