Undersubscribed
The minimum subscription is the lowest amount of IPO shares investors need to buy for a company’s IPO to complete successfully and list on a share market - typically 90%. If the threshold isn’t met for a minimum subscription, it’s considered an undersubscribed IPO - where supply is greater than demand. While it’s not common, the company returns the money from the orders placed. An undersubscribed IPO can be due to poor promotion, overpricing, or share market or economic conditions at the time. It can also be referred to as underbooking. This contrasts with an oversubscribed IPO.
Underwriter
Underwriters are investment banks like Morgan Stanley or JP Morgan that work closely with companies to manage the end-to-end IPO process. They help decide the initial offering price, promote the IPO in a roadshow and distribute shares to investors. They reduce the company’s risks during the IPO process by agreeing to assume the risk of buying all or a portion of the shares to be issued in the IPO and then selling those to the public at the IPO price. But of course, they command big fees for doing so.
