Editing Subscription (finance)

{{short description|Process of investors}}
{{More citations needed|date=January 2013}}
'''Subscription''' refers to the process of [[investor]]s signing up and committing to invest in a financial instrument, before the actual closing of the purchase. The term comes from the [[Latin]] word ''subscribere''.

==Historical==
===Praenumeration===
An early form of subscription was [[praenumeration]], a common business practice in the 18th-century book trade in Germany. The publisher offered to sell a book that was planned but had not yet been printed, usually at a discount, so as to cover their costs in advance. The business practice was particularly common with magazines, helping to determine in advance how many subscribers there would be.<ref>{{cite book
 |chapter=Praenumeration
 |editor=Severin Corsten
 |title=Lexikon des gesamten Buchwesens
 |volume=VI
 |publisher=Verlag Anton Hiersemann
 |location=Stuttgart
 |year=1991
 |ISBN=3-7772-8527-7
 |page=S. 81}}</ref> Praenumeration is similar to the recent [[crowdfunding]] financing model.

==New issues==

===Subscription agreement===
Subscription to new issues can be covered by a subscription agreement, legally committing the investor to invest in the financial instrument, and committing the company to certain obligations and warranties. In some jurisdictions, it is possible for the issuer and subscriber to use a template subscription agreement as the basis of this agreement, although bespoke contract drafting by a qualified specialist may be required in more complex cases.

===Subscription period===
When a new [[security (finance)|security]] is to be issued, investors typically have two weeks to submit their subscription orders. At the end of this subscription period, the issuer announces the offering price and the method of allotment.

===Allotment===
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 [[stock|shares]] or [[Bond (finance)|bond]]s 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 investor groups.

==Oversubscription==
A [[funding round]] is oversubscribed when the company has obtained [[funding]] commitments from [[investor]]s that, in aggregate, amount to more money than the company needs or intends to raise. The term may be used informally to describe a state where there is more money available than the company needs.

==See also==
*[[Initial public offering]]
*[[Greenshoe]]

==References==
{{Reflist}}

{{Authority control}}

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[[Category:Financial markets]]
[[Category:Securities (finance)]]
[[Category:Procurement]]


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