Difference Between Floor Price And Cut Off Price In Ofs

Take the example of mmtc.

Difference between floor price and cut off price in ofs. Bidding at floor price and above ensures that the bids will be considered. In an ofs floor price is a base price or the minimum price at which the sale of shares would take place. Or any price above the floor price. For retail investors however there is a unique option of bidding at cut off price.

The discounted price is one of the key reasons to buy shares during an offer for sale and not from the secondary market. But here in an ofs there is only one price which gets disclosed by the promoters or the selling shareholders and that is the floor price i e. Under ipos fpos there is a price band in which the investors need to bid for the shares or simply give their consent to buy the shares at the â œcut offâ price. This issue price is called cut off price.

In june 2013 the ofs was offered at a steep discount of 72 per cent thanks to low free float shares and hence low volumes and premium valuations on lack of efficient price discovery mechanism. But sometimes things go overboard. You ll also learn some of the key aspects on ofs such as cut off price allotment process of shares floor price what role an nii non insitutional investor playes in the ofs process. Retail investors may be offered a discount on the floor price especially in ofs of psu companies.

As the name suggests it is the minimum price at which you can bid for the shares under ofs. Another unintended consequence of a price floor comes into play in professions that are regulated and require licensing such as electricians. With ofs there is a â œfloor priceâ. 254 per share in the pfc ofs.

The floor price is generally set at a discount to the prevailing price. In this case company will decide the price of the share and investor buy the share at whatever the price decided by the company is called as cut off price. A price floor can lead to inefficient allocation of sales among sellers and selling high quality goods at a high price when a lower quality item at a lower price would do. There is no upper price limit at which the retail bidders would get a confirmed allotment and there is no method by which they could guesstimate it.

In today s pfc ofs the government will fix the cut off price for the retail investors only after the ofs gets over and in case of huge oversubscription the price.