Allotment
Allotment is the assignment of a specified number of offered securities to an applicant after subscription and allocation rules are applied.
Understand rights issues, open offers, nil-paid entitlements, subscription privileges, allotments, and unsubscribed shares.
Rights Issues and Open Offers explains how companies offer new shares to existing shareholders, how entitlements are exercised or transferred, and how untaken shares are allocated. The central questions are whether the entitlement is tradable, how much cash a holder must contribute, and what happens if the holder does nothing.
Terminology varies by jurisdiction. In UK usage, a rights issue generally uses renounceable, tradable nil-paid rights, while an open offer does not use a renounceable document. In U.S. rights offerings, subscription rights may be transferable or non-transferable according to the prospectus.
| Term | Use it for |
|---|---|
| Rights Issue | A proportional offer of new shares to existing holders, commonly with tradable rights in UK usage |
| Renounceable Rights | Transferable subscription entitlements that can generally be exercised, sold, or transferred before expiry |
| Open Offer | A proportional existing-holder offer whose entitlement is generally not separately tradable |
| Stock Rights | The short-lived subscription rights or entitlements used to buy shares under stated terms |
| Nil-Paid Shares | Tradable rights entitlements before the subscription price is paid |
| Allotment | The number of securities assigned after valid subscriptions and allocation rules are applied |
| Oversubscription Privilege | A conditional request for shares left after basic subscriptions |
| Unsubscribed Shares | Offered shares not taken up through basic subscriptions by the deadline |
The articles use a company with 100 million existing shares trading at $12 that offers 25 million new shares at $8 through a 1-for-4 issue.
These are mechanical estimates. Actual trading prices, transaction costs, taxes, allocation, and investor behavior can produce different results.
Depending on the documents, an eligible holder may exercise all or part of the entitlement, sell a transferable right, apply for extra shares, or allow an entitlement to lapse. An open-offer entitlement may not be sellable. A holder who neither participates nor receives compensation can lose percentage ownership when new shares are issued.
These pages are educational. Rights and open-offer decisions can involve loss of entitlement value, ownership dilution, market risk, tax consequences, and strict deadlines; use the official transaction documents and qualified advice where appropriate.
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Allotment is the assignment of a specified number of offered securities to an applicant after subscription and allocation rules are applied.
Nil-paid shares are tradable rights-issue entitlements for which the subscription price has not yet been paid.
An open offer gives existing shareholders a proportional opportunity to buy new shares without a separately tradable entitlement.
An oversubscription privilege lets eligible holders request shares left after other investors do not exercise their basic subscription rights.
Renounceable rights are transferable subscription entitlements that holders can exercise, sell, or transfer before a stated deadline.
A rights issue offers existing shareholders new shares in proportion to their holdings, commonly through tradable subscription rights.
Stock rights are short-lived subscription entitlements to buy company shares under a specified ratio, price, and deadline.
Unsubscribed shares are offered shares left after eligible investors do not fully exercise or complete their basic subscriptions.