Under-subscription and over-subscription refer to the situation in which the demand for securities, such as shares or bonds, is less than or greater than the supply of those securities, respectively.

Here are five points of distinction between under-subscription and over-subscription:

(i) Definition: Under-subscription refers to the situation in which the demand for securities is less than the supply, while over-subscription refers to the situation in which the demand for securities is greater than the supply.

(ii) Impact on the issuing company: Under-subscription may result in the issuing company not being able to raise the desired amount of capital, while over-subscription may result in the company raising more capital than it intended.

(iii) Impact on investors: Under-subscription may lead to investors not being able to secure the desired number of securities, while over-subscription may result in investors being allocated fewer securities than they applied for.

(iv) Allocation of securities: In under-subscription, the issuing company may allocate the securities on a pro rata basis, while in oversubscription, the securities may be allocated through a lottery system or through the discretion of the issuing company.

(v) Pricing of securities: Under-subscription may lead to a lower price for the securities, while over-subscription may result in a higher price for the securities.