An oversubscription occurs when the demand for a financial offering — such as shares in a new stock issuance, bonds or participation in a corporate action such as an entitlements issue — exceeds the number of securities available.

When there is an oversubscription, the company (or its advisors) applies allocation rules to distribute the available securities fairly.

These rules often allocate securities proportionally to the number of shares already held by investors or based on other predefined priorities.