what is unsubscribed 
the term unsubscribed refers to any shares that are part of an initial public offering ipo that are not purchased ahead of the official release date this means there is little to no interest in the security in advance of the company s ipo put simply being unsubscribed means that demand for shares is low analysts and investors may safely assume that ipos that become subscribed are overpriced being unsubscribed may prevent companies from raising the capital they need to meet their goals understanding unsubscribedprivate companies go through the ipo process when they want to go public doing so allows them to go to the market and sell shares in order to raise money for their day to day operations and growth plans an ipo subscription refers to an order placed by an investor usually an institutional investor for newly issued securities before they are officially issued these shares are issued directly by the company rather than through a broker on the secondary market unsubscribed shares refer to the portion of any stock that remains unsold before the ipo this means that demand for company stock is low and is outweighed by the overall supply as noted above it is often a sign that the company and its underwriters have priced the ipo share price too high companies that go through the ipo process generally have a target in mind as to how much capital they intend to raise from the offering being unsubscribed means that they won t be able to raise the capital they initially hoped as such it may lead to a disruption in their day to day operations or growth plans to an individual investor or analyst the lack of interest may be taken as a sign that an ipo is going to be a flop unsubscribed shares may rise or fall according to the whims of the open market they can then be purchased or sold only among investors on the secondary market primarily through the public stock exchanges or by using a broker in unsubscribed ipos which may also be called undersubscribed the issuing company may recall the shares and reimburse the few buyers who expressed interest this is in contrast to an oversubscribed ipo in which investor demand far outweighs the supply of shares available the underwriters responsible for an oversubscribed offering can adjust the price or offer more shares to meet the demand preparing for an ipoa company s ipo is typically underwritten by an investment bank this institution tries to determine the offering price that will result in an optimal number of subscriptions setting an offering price that s too high will likely result in the shares being unsubscribed as such the size of the unsubscribed portion of the ipo can affect the overall price of an entire lot of shares the issuing company in the ipo may require an underwriter to buy the unsubscribed portion reasons for unsubscribed sharesas mentioned earlier the primary reason is often due to the fact that the ipo share price is set far too high but there are other reasons why an ipo may be unsubscribed some of these include other funding optionssuccessful ipos subscribed and oversubscribed ones are those that raise a lot of capital this helps keep the business afloat while allowing it to fund its operations and growth strategies but what happens when an ipo becomes unsubscribed and fails companies may have to find other ways to raise money some of these options include example of unsubscribedhere s a hypothetical example to show how unsubscribed shares work let s say that company x is about to go public and wants to issue an ipo of eight million shares its investment bank underwrites the ipo prepares documents detailing the company s business model and financial outlook and then shops this information to potential buyers to see if they will subscribe to the offering or agree to buy shares of it prior to its release most of these potential buyers are institutional investors or other large scale buyers once the underwriting bank gauges the level of interest it will decide how many shares to sell and at what price but let s assume that the underwriting bank finds buyers for seven million of company x s eight million shares and it agrees to sell those shares for 20 apiece one million of the shares remain unsubscribed company x may not earn as much from its ipo as it had hoped to earn 