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Under Subscription of Shares Video Lecture | Accountancy Class 12 - Commerce

41 videos|106 docs|56 tests

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.
41 videos|106 docs|56 tests
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