Who actually gets shares at the IPO price — spoiler: probably not you.
IPO allocation refers to the process by which underwriting banks distribute shares from the IPO offering to investors at the offer price. Because IPO shares are typically oversubscribed — demand exceeds supply — banks must ration shares across investors. Allocation is discretionary: banks direct shares to institutional clients based on relationship value, order size, and whether the client provided useful feedback during the roadshow. Retail investors receive shares through a separate, broker-managed allocation process that typically receives a small fraction of the total offering.
Allocation Fill Rate = Shares Received ÷ Shares Requested × 100%If you requested 1,000 shares at the offer price and received 200, your fill rate is 20%. In a hot IPO, institutional fill rates might be 10–30%. Retail fill rates through brokerages are often even lower — sometimes as few as 10 shares per account regardless of request size. Fill rate is a rough proxy for how oversubscribed the IPO was: lower fill rates = higher demand = more likely to pop.
High institutional fill rate (>50%)
Demand didn't dramatically exceed supply. The IPO may have been fairly priced or demand was softer than expected. Lower probability of a large first-day pop, but also lower probability of a first-day crash.
Low institutional fill rate (<20%)
Heavily oversubscribed. Banks rationed shares tightly across their client base. This is the setup for a first-day pop — supply is scarce relative to demand. The offer price likely underpriced the stock.
Retail allocation available at offer price
Some brokers (Robinhood, Fidelity, SoFi) offer retail IPO access. Getting allocated shares at offer price is genuinely advantageous in hot IPOs — you're in with the institutions. But check whether the IPO is actually oversubscribed or if retail access means institutions passed.
Allocation is the mechanism that explains why IPOs appear to be a great deal for some investors and a terrible deal for others. The same IPO creates different outcomes depending entirely on whether you got shares at the offer price or bought in the open market after the pop. Understanding allocation explains the entire asymmetry of the IPO system: the people with access get the upside, the people without access provide the exit liquidity.
Many retail investors assume IPO access is democratised now that apps like Robinhood offer it. The reality is more nuanced. Retail IPO programmes do provide offer-price access, but typically only for hot deals that are already oversubscribed — and even then, allocations are tiny. For less exciting IPOs, retail access is easy to get precisely because institutions didn't want the shares. Easy access to an IPO is sometimes a warning sign, not a perk.
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