IPO Equal Allocation vs Pro Rata Allocation, What’s the Difference?

TL;DR

• Equal allocation gives each applicant the same initial allotment, while pro rata allocation assigns shares according to the number of shares applied for.
• Before subscribing, check account setup, subscription collateral, and the allotment result step by step. Confirm the latest rules in your broker notice.

1. Summary of allocation methods

Equal allocation: Each applicant receives the same quantity first, and any remaining shares may be redistributed. This mechanism generally aims to give small investors a chance. Pro rata allocation: Shares are allotted in proportion to the number of shares each applicant applied for. Applicants who apply for more shares are more likely to receive a larger allotment.

2. Pre-subscription checklist (for beginners)

1) Open a securities account and a subscription-enabled account: You need an account at a broker that supports IPO subscriptions. If you already have one, verify subscription eligibility and how to use mobile/HTS services.
2) Prepare subscription collateral: Collateral ratios vary by broker. Check the latest standards in your broker notice.
3) Check the subscription schedule and allocation ratios: The IPO notice will state the equal allocation/pro rata allocation ratio. Review the issuer disclosure and broker guidance in advance.

3. Step-by-step subscription procedure

1) Check the IPO notice: Confirm the number of shares offered, subscription period, subscription unit, and allocation ratio in the disclosure.
2) Submit subscription: Apply for the number of shares you want. Heavy equal allocation favors small applicants, while large pro rata allocation gives weight to the quantity applied for.
3) Deposit collateral and wait: After subscribing, deposit the required collateral to the designated account. Understand refund and correction rules after deposit.
4) Check allotment results: The broker notifies you of the allotment on the allocation date. Equal allocation may include a lottery result.
5) Payment/refund processing: Proceed with payment for allotted shares or refund excess collateral.

4. Calculation examples and cautions (simplified)

• Equal allocation: If the applicant pool is 1,000 people and the equal allocation share is 10 shares, first allot 10 shares to every applicant, then redistribute remaining shares. Actual calculation methods vary by IPO, so check the disclosure.
• Pro rata allocation: Shares are allotted based on an individual applicant's share of the total subscriptions. Larger application amounts increase allotment ratios.

Caution: Actual allotments apply various rules such as rounding, minimum allotment units, and priority (institutional/retail).

5. Practical tips and reference sources

• Always check the allocation ratio (equal/pro rata) in the IPO notice. Some IPOs fix an equal allocation portion at a set ratio.
• Verify subscription collateral, refund rules, and tax-related standards with your broker and the tax authority.
• To monitor target IPOs, use My Stock Radar to register subscription schedules for convenience.

This article is for information only and is not investment advice.