Question

Oman International Marketing Company (OIMC) has decided to issue an IPO for OMR 4.980 Million in June 2020. The per share value is decided for 600 Baiza. Oman International Marketing has appointed your firm as an underwriter for this IPO. During the phase of ‘call for application’, your firm has received applications for 9.500 Million shares.

Required:

1. Whether OIMC’s IPO is undersubscribed or oversubscribed with current receipt of applications for shares i.e. 9.500 Million shares?
2. How many actual applications are needed for full subscription of OIMC’s IPO?
3. After receipt of applications for 9.500 Million shares, as an underwriter of this IPO, which treatment you would suggest to the management of Oman International Marketing Company to make this IPO up-to its ‘Full Subscription’ only?

                       

Answer 1

Solution (a)	Whether OIMC’s IPO is undersubscribed or oversubscribed with current receipt of applications for shares i.e. 9.500 Million shares?
	Application received for
	= 9.5*0.600
	=OMR 5.7 Million
	IPO needed
	= OMR 4.980 million
	Since, Amount is higher than original subscription of share, IPO is oversubscribed.
Solution (b)	How many actual applications are needed for the full subscription of OIMC’s IPO?
	= 4.980/0.600
	=8.3 Million shares
	Hence, 8.3 Million actual application needed for full subscription of IPO
Solution (b)	which treatment you would suggest to the management of Oman International Marketing Company to make this IPO up-to its ‘Full Subscription’ only?
	Since IPO is oversubscribed, management needs to issue the share on a pro-rata basis means allote 83 share for every 95 Application received to make the IPO fully subscrived.