Close this search box.

Table of Contents



In finance, undersubscribed refers to a situation when the demand for an offering, such as shares in an IPO (Initial Public Offering), bonds, or other securities, is less than the quantity being offered. In other words, there are not enough buyers for the securities being sold. This often has negative implications for the issuer as it may lead to reduced capital raising or lower share prices.


The phonetic spelling of “Undersubscribed” is: ʌndərsəbˈskraɪbd

Key Takeaways

  1. When a security offering, such as an initial public offering (IPO), or another selling of securities, is undersubscribed, fewer shares are sold than are really available.
  2. An IPO or other securities offering could be undersubscribed for a variety of reasons. These motives consist of:
    1. The asking price can be excessive.
    2. It’s possible that the business is unknown or has a poor track record.
    3. There could be unfavorable information about the business or the sector.
  3. For the company involved, an undersubscribed IPO might have a number of negative effects. These effects consist of:
    1. It might be necessary for the corporation to cut the offering price or end the offering entirely.
    2. Future capital raising may prove challenging for the business.
    3. The stock price of the corporation could be less than anticipated.


The term “Undersubscribed” is important in business and finance as it refers to a scenario when the demand for an initial public offering (IPO), bond issuance, or other new issue of securities is less than the number of shares or bonds being offered. This can be problematic for the issuing company as it signals a lack of investor interest, which can negatively affect the company’s ability to raise capital, its market reputation, and stock price. Identifying an undersubscribed offering early can allow companies to adjust their strategies accordingly, potentially altering the pricing, marketing plan, or even postponing the offering, in contrast to an oversubscribed offering where demand exceeds the issued share quantity.


In the realm of finance and business, the term “undersubscribed” plays a significant role, especially in the context of public offerings or new issues within a market. Essentially, a situation is described as undersubscribed when the demand for an initial public offering (IPO) or share issuance does not meet the number of shares or securities available. This usually points to a lack of interest or confidence from the investors in the product or the issuing company, potentially stemming from poor marketing, pricing issues, or a general uncertainty within the economic climate. Undersubscription is a vital indicator of a company’s standing and assessment in the market. Companies aim to avoid undersubscribed situations as they are generally seen as a failure to generate sufficient interest or raise adequate capital, which could undermine the company’s reputation amongst investors. However, underwriters often protect against this risk by agreeing to purchase any remaining shares at the offer price. This mechanism is crucial in ensuring that companies can raise the maximum amount of funds during security issuances regardless of how the market perceives them. Therefore, understanding and managing undersubscription is a must for underwriters and businesses intending to debut in the capital markets.


1. Initial Public Offering (IPO) of a Company: Suppose a tech startup decides to go public and go through an IPO process. They release 1 million shares for subscription at a particular price but only 800,000 shares are actually sold. This would make the IPO undersubscribed, as the demand for shares was less than the supply made available by the company. 2. Government Bonds: If a government issues bonds to raise funds, but the demand from investors is lower than the quantity of bonds issued, then that particular government bond issue is said to be undersubscribed. For example, in 2016, the government of Taiwan issued a bond that was undersubscribed with only 96% of the total available securities sold. 3. Rights Issue: A company might want to raise capital by giving its existing shareholders the right to buy additional shares at a discount, this is known as a Rights Issue. If the shareholders do not buy all of the shares available (maybe the company is performing poorly and the shareholders do not want to invest more money), the Rights Issue will be undersubscribed. For instance, in 2019, Mothercare’s £46m rights issue was undersubscribed with only 95% of the shares purchased.

Frequently Asked Questions(FAQ)

What does undersubscribed mean in finance and business terms?
In finance, undersubscribed refers to a situation where the demand for an issuance of securities, such as bonds or shares, is less than the number of securities being offered by the issuing company. This typically implies a lower level of interest from investors.
What are the consequences for a company if an issue is undersubscribed?
If an issue is undersubscribed, the company may not raise the intended amount of capital, which could impact its operations or proposed projects. It might have to rely on underwriters to purchase the unsubscribed portion, reshare the offering or cancel the issue.
How often does undersubscription occur?
The frequency of undersubscription can vary depending on market conditions, the popularity of the company that’s issuing the securities, and current investor sentiment. During periods of economic uncertainty or market downturns, undersubscription can be more common.
What is the difference between oversubscribed and undersubscribed?
Oversubscribed refers to the opposite situation, where demand for an issuance of securities exceeds the number of shares or bonds being offered. In this case, the issuing institution often allocates shares to investors on a proportional basis.
How can companies prevent an undersubscription?
Companies typically get the word out about their issuance of securities through means of marketing. This can involve communications from the management, press releases, media appearances, and even roadshows. They can also set a realistic price for their offering that reflects both the aspirations of the company and the market conditions.
What happens to an investor’s application in an undersubscribed issue?
In an undersubscribed issue, all investors who applied for securities are likely to receive the full amount of securities they asked for, since the demand is lesser than the supply.
Does undersubscription indicate the company’s ill health?
Not necessarily. While undersubscription might indicate a lack of investor interest, it can also be a product of unfavorable market conditions, not necessarily a reflection of the company’s performance or potential.

Related Finance Terms

  • Over-Subscription
  • Initial Public Offering (IPO)
  • Capital Markets
  • Share Allotment
  • Unfilled Orders

Sources for More Information

About Our Editorial Process

At Due, we are dedicated to providing simple money and retirement advice that can make a big impact in your life. Our team closely follows market shifts and deeply understands how to build REAL wealth. All of our articles undergo thorough editing and review by financial experts, ensuring you get reliable and credible money advice.

We partner with leading publications, such as Nasdaq, The Globe and Mail, Entrepreneur, and more, to provide insights on retirement, current markets, and more.

We also host a financial glossary of over 7000 money/investing terms to help you learn more about how to take control of your finances.

View our editorial process

About Our Journalists

Our journalists are not just trusted, certified financial advisers. They are experienced and leading influencers in the financial realm, trusted by millions to provide advice about money. We handpick the best of the best, so you get advice from real experts. Our goal is to educate and inform, NOT to be a ‘stock-picker’ or ‘market-caller.’ 

Why listen to what we have to say?

While Due does not know how to predict the market in the short-term, our team of experts DOES know how you can make smart financial decisions to plan for retirement in the long-term.

View our expert review board

About Due

Due makes it easier to retire on your terms. We give you a realistic view on exactly where you’re at financially so when you retire you know how much money you’ll get each month. Get started today.

Due Fact-Checking Standards and Processes

To ensure we’re putting out the highest content standards, we sought out the help of certified financial experts and accredited individuals to verify our advice. We also rely on them for the most up to date information and data to make sure our in-depth research has the facts right, for today… Not yesterday. Our financial expert review board allows our readers to not only trust the information they are reading but to act on it as well. Most of our authors are CFP (Certified Financial Planners) or CRPC (Chartered Retirement Planning Counselor) certified and all have college degrees. Learn more about annuities, retirement advice and take the correct steps towards financial freedom and knowing exactly where you stand today. Learn everything about our top-notch financial expert reviews below… Learn More