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Retention / Allotment

The number of shares during an IPO granted to each participating underwriter for sale. When a company is going public and is going to hold an initial public offering, the IPO must be underwritten by financial institutions. It is common for two or more underwriters to be involved in an IPO. Allotment refers to the number of shares that each underwriter receives to sell.

Allotment can also refer to any instance in which company directors issue new shares and set a certain amount aside for predetermined shareholders. An IPO is the most common example of new shares being offered, but they can be issued at any time. In nearly all cases, this is done to raise money to raise capital for expenses or expansion.

 

EXAMPLE:

A social media site decides to go public after explosive growth and popularity. There are four financial institutions underwriting the initial public offering, and each underwriter is given an allotment of shares.