Oversubscription is when the demand in shares for an offer, such as a rights offer, placement, or share purchase plan, is greater than the number of shares available. Scaling occurs if shareholders have applied for more shares than there are shares available.
Oversubscription facility
If someone chooses to take up less than their entitled shares, the remaining shares go into an oversubscription pool. If you apply for all of your entitled shares, you can apply for more shares from this pool. Sometimes there’s a limit to how many more additional shares you can apply for. This is usually based on the number of shares you owned on the record date.
If you’ve applied for an oversubscription facility and shares are available, you may receive these, as well as your entitled shares. If there are no shares available in the oversubscription, you’ll just receive your shares from your initial application. If there are some additional shares available in the oversubscription pool, you can be scaled.
Rights offers in particular often allow investors the opportunity to apply for an oversubscription facility.
There’s no guarantee that you’ll receive all, or any, of the shares you apply for through an oversubscription facility.
Scaling
Your share allocation is usually scaled back based on the number of shares you own in that company on the record date. This means you end up getting fewer shares than the amount you applied for. In some cases, it’s possible that you don’t receive any shares as part of the offer, such as if you hold a small amount of shares.
Scaling is most common in share purchase plans and placements, because there’s no set criteria for the number of shares a shareholder’s eligible to apply for. It also occurs when there’s an oversubscription facility with a rights offer.
There’s no way of telling in advance if a corporate action will be scaled or not, or how heavily it might be scaled.
For scaled back applications, we’ll refund any money that wasn’t used into your Wallet in NZD, as soon as we receive the funds back from the registry. This can be from a few days, to weeks.