Why IPO Results Can Differ from Estimates
Introduction
IPO allotment estimates and probabilities are often used by investors to understand possible outcomes. However, actual IPO results frequently differ from such estimates. This document explains why such differences occur, in a purely educational and informational manner.
Estimates Are Based on Incomplete and Dynamic Data
IPO estimates are usually derived from subscription data available during the issue period. This data keeps changing until the issue closes, and the final numbers used for allotment may be significantly different from interim figures.
Difference Between Applications and Valid Applications
Subscription numbers often reflect total bids received, not necessarily valid applications. Invalid, duplicate, or rejected applications are removed before final allotment, which can materially change the effective demand.
Category-Wise Adjustments Before Allotment
Shares are allocated across categories such as Retail, NII, and QIB based on regulatory rules. Inter-category adjustments and spillovers may occur if a category is undersubscribed, impacting final allotment outcomes.
Cut-Off Price vs Non–Cut-Off Bids
In book-built IPOs, investors may bid at cut-off or specific prices. Only bids at or above the final issue price are considered valid, which can reduce the pool of eligible applications compared to raw bid counts.
Rounding and Lot Size Constraints
Allotment is done in whole lots, not fractional shares. Rounding effects and lot size constraints can cause deviations between theoretical estimates and actual allotment results.
Randomization and Lottery Mechanism
When the number of valid applications exceeds available lots, allotment is carried out through a computerized draw. Random selection introduces natural variability, making exact prediction impossible even with accurate estimates.
Late Bid Modifications and Withdrawals
Investors are allowed to revise or withdraw bids during the IPO period. Last-day changes can materially alter demand patterns, leading to differences between earlier estimates and final results.
Registrar-Level Verification and Data Cleaning
Before finalizing allotment, the registrar performs multiple verification checks. Data cleaning, rejection of invalid bids, and reconciliation with banks and depositories can all impact final allotment numbers.
Assumptions Used in Estimation Models
Most allotment estimates rely on simplified assumptions, such as equal probability per application. Real-world IPO allotment involves complex regulatory and operational rules that cannot be perfectly captured by simplified models.
Human Interpretation and Reporting Differences
Different platforms may interpret or present subscription data differently. Variations in reporting methodology can lead to inconsistent estimates across tools and sources.
Important Notice
This document is provided strictly for educational and informational purposes only. It does not constitute investment advice, financial advice, or any assurance of IPO allotment or results. Actual allotment is determined solely by the IPO registrar as per applicable regulations.