ALLOTMENT (FINANCIAL)

In its financial meaning, an Allotment is a method of distributing securities to investors when an issue has been oversubscribed. At the end of the subscription period, the demand for a new issue can exceed the number of shares being issued. In such cases, the underwriting bank allots the securities with the approval of the issuer, either by lottery or on the basis of a formula. An allotment formula usually takes into account the issuer's preferred target groups.