We'll get to what the term "allocation notice" means in a minute, but first a brief aside about IPOs. (Hint: allocation notices are related to IPOs.)
Companies begin trading their stocks by conducting something called an initial public offering, or IPO. This means that they set aside some of the company's stock, which is then made available to the public. Before it begins trading, though, some insiders and others with an inside track get offered shares. They can then sell the shares on the public market after the stock begins trading.
If a stock is popular, this can lead to a big payday for people who got this early IPO stock. For that reason, the line for these shares is often pretty long (figuratively, of course; rich people, like those with the inside track for IPO shares, rarely wait in actual lines).
When the IPO process is underway, potential investors put in their request for some of these early shares. Due to the popularity, there might not be enough shares available to fill every order completely.
Now we get to the term "allocation notice." An allocation notice represents how the investor finds out if their order will get filled, and if they will get the full amount they asked for or a partial order. Hence, investors are notified of their allocation (makes sense, right?).
Think about it as the part of a speed dating event where you find out if the people you picked also picked you. Only, in this case, you might find out that you could get 79% of a date.
Related or Semi-related Video
Finance: What is an IPO?25 Views
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both well actually most people just spell it out I
po It stands for initial public offering In the three
words tell the story and i pl refers to a
company who's raising money by selling shares of itself to
the public for the first time a maiden voyage in
public funding if you will Whatever dot com has forty
million shares outstanding after three private rounds with venture capitalists
and private investors it wants to raise money to go
big internationally And for the first time it will offer
shares to joe and jill public And that means that
all of it shares will be tradable publicly on the
open market like on nasdaq or the new york stock
exchange That is the insiders early investors founders et cetera
will be able to just call their broker at schwab
or fidelity or wherever and sell their shares get liquid
and buy themselves a maserati because it's not what everyone
does after a nice meal So whatever dot com sells
ten million shares a twelve bucks each to raise one
hundred twenty million dollars which they can spend to build
out offices all over the world So yeah that's an
ai po and that's Why a company generally wants to
make shares available to the public because once you've made
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