Definition
Spillover (IPO Categories)
Spillover is the reallocation of unsubscribed shares from one IPO investor category to another that is oversubscribed.
If one category of a book-built IPO is not fully subscribed, SEBI rules allow the undersubscribed shares to be shifted to oversubscribed categories within prescribed limits, helping the issue clear. The QIB portion, however, has stricter rules and cannot simply absorb spillover the way other categories can.
Spillover affects the final basis of allotment and the chances of getting shares in a given category. The offer document describes how undersubscription in any category will be dealt with.
Related terms
- Basis of AllotmentThe basis of allotment is the formula, approved by the exchange, that decides how shares are distributed among applicants when an IPO is oversubscribed.
- UndersubscriptionUndersubscription is when an IPO fails to attract bids for all the shares on offer.
- Book Built Issue CategoriesIn a book-built IPO, the net offer is split into reserved portions for QIBs, non-institutional investors and retail investors.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.