What is allocation?
Stocks, funds, IPOs
Allocation is the percentage of the executed IPO application. That is, you are likely to receive fewer shares than you indicated in the application. This happens because due to a large number of interested investors, the underwriters can only satisfy a portion of the brokerage application. It happens that from just one broker, the amount of the collective application exceeds the entire offering. Therefore, if you submitted an application for $2,000, you may be credited with $500 worth of stock and the rest will just go back into the brokerage account.