Commerce Exam > Commerce Videos > Accountancy Class 12 > Under Subscription of Shares
Under Subscription of Shares Video Lecture | Accountancy Class 12 - Commerce
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FAQs on Under Subscription of Shares Video Lecture - Accountancy Class 12 - Commerce
| 1. What is under subscription of shares? |  |
Ans. Under subscription of shares refers to a situation where the number of shares applied for by investors is less than the total number of shares offered by a company during an initial public offering (IPO) or a rights issue. In other words, it means there is insufficient demand for the shares being offered.
| 2. What happens in case of under subscription of shares? | |
Ans. In case of under subscription of shares, the company may have to take certain actions to ensure that all the offered shares are sold. This can include extending the IPO or rights issue period, lowering the price of the shares, or allocating the remaining shares to the underwriters or existing shareholders.
| 3. What are the reasons for under subscription of shares? | |
Ans. There can be several reasons for under subscription of shares. Some common reasons include lack of investor confidence in the company or the overall market, overpricing of the shares, unfavorable market conditions, or insufficient marketing efforts to create awareness and generate demand for the shares.
| 4. What are the implications of under subscription of shares for the company? | |
Ans. Under subscription of shares can have negative implications for the company. It may indicate a lack of investor confidence, which can impact the company's reputation and hinder its ability to raise capital in the future. Additionally, if the company is unable to sell all the offered shares, it may not be able to raise the desired amount of funds, affecting its growth and expansion plans.
| 5. How can companies mitigate the risk of under subscription of shares? | |
Ans. Companies can take certain measures to mitigate the risk of under subscription of shares. This includes conducting thorough market research to determine the demand for the shares, setting a realistic and competitive price, implementing effective marketing strategies to create awareness and generate interest, and seeking the assistance of underwriters who can help ensure the successful sale of the shares.
Text Transcript from Video
next oversubscription
as we discussed before if the number of
shares subscribed for is more than the
issue then there is a case of over
subscription a company can only a lot
that many shares that it issued the
excess number would have to be refunded
so if a company issues
one lakh shares but subscriptions are
received subscriptions are received for
1 lakh 50,000 shares then there is a
case of over subscription this extra
money has to be refunded we cannot issue
we cannot allot more shares than the
amount of issue what is under
subscription if in an issue of 1 lakh
shares if the amount of subscription is
lower say it is only 80,000 shares then
it is a case of under subscription
according to the Securities and Exchange
Board of India according to CB at least
90 percent of the issue has to be
subscribed for that is this 90 percent
is called the minimum subscription and
if the minimum subscription is not
achieved then the entire issue falls
through and the money has to be refunded
to the investors so therefore when there
is a shared issue there could be an over
subscription in which case the extra
money has to be refunded there could be
an under subscription if the under
subscription is such that it is the
number of shares or received is lower
than the minimum subscription the entire
issue the entire amount has to be
refunded otherwise the number of shares
subscribed for would be lower
than that which was issue
as we discussed before if the number of
shares subscribed for is more than the
issue then there is a case of over
subscription a company can only a lot
that many shares that it issued the
excess number would have to be refunded
so if a company issues
one lakh shares but subscriptions are
received subscriptions are received for
1 lakh 50,000 shares then there is a
case of over subscription this extra
money has to be refunded we cannot issue
we cannot allot more shares than the
amount of issue what is under
subscription if in an issue of 1 lakh
shares if the amount of subscription is
lower say it is only 80,000 shares then
it is a case of under subscription
according to the Securities and Exchange
Board of India according to CB at least
90 percent of the issue has to be
subscribed for that is this 90 percent
is called the minimum subscription and
if the minimum subscription is not
achieved then the entire issue falls
through and the money has to be refunded
to the investors so therefore when there
is a shared issue there could be an over
subscription in which case the extra
money has to be refunded there could be
an under subscription if the under
subscription is such that it is the
number of shares or received is lower
than the minimum subscription the entire
issue the entire amount has to be
refunded otherwise the number of shares
subscribed for would be lower
than that which was issue
About this Video
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Oct 23, 2024 Last updated |
Video Description: Under Subscription of Shares for Commerce 2024 is part of Accountancy Class 12 preparation.
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Video Lecture & Questions for Under Subscription of Shares Video Lecture | Accountancy Class 12 - Commerce - Commerce full syllabus preparation | Free video for Commerce exam to prepare for Accountancy Class 12.
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