So, I had to Google "over-allotment option," so I have a definition, but I don't think I understand the implications. This means that MDA's IPO did really well, right? It mentions the share price, but I have no idea if that was higher than expected or not. I would love someone with a better understanding finance and MDA in particular to provide some more context.
The per-share price at an IPO is locked in by the institutional investors/financial institutions leading the IPO.
Because the price the Company receives is fixed, if demand (for the shares) exceeds expectations: then the institutional investors/traders get to profit from the difference between the IPO price and the market price.
So, companies can put an over-allotment option clause in the IPO. This lets them issue extra shares if demand is high, so they can get extra funding from the higher than expected demand.
So why not just issue more shares from the start? Well the financial institutions leading the IPO want to be cautious not to over-supply. Because the initial price is fixed, if there is too much supply and the market price falls, they are the ones left holding the bag.
All that to say yes, this is good for MDA. Investor demand for their shares is high and they were able to raise an extra $41 million.
So, I had to Google "over-allotment option," so I have a definition, but I don't think I understand the implications. This means that MDA's IPO did really well, right? It mentions the share price, but I have no idea if that was higher than expected or not. I would love someone with a better understanding finance and MDA in particular to provide some more context.
The per-share price at an IPO is locked in by the institutional investors/financial institutions leading the IPO.
Because the price the Company receives is fixed, if demand (for the shares) exceeds expectations: then the institutional investors/traders get to profit from the difference between the IPO price and the market price.
So, companies can put an over-allotment option clause in the IPO. This lets them issue extra shares if demand is high, so they can get extra funding from the higher than expected demand.
So why not just issue more shares from the start? Well the financial institutions leading the IPO want to be cautious not to over-supply. Because the initial price is fixed, if there is too much supply and the market price falls, they are the ones left holding the bag.
All that to say yes, this is good for MDA. Investor demand for their shares is high and they were able to raise an extra $41 million.
That's great! I look forward to seeing great things to come from the government of Canada and MDA.