Definition
Subscription refers to the process of applying for shares when a company offers them to the public through an IPO (Initial Public Offering). It also indicates the level of investor demand for the issue. The subscription figure shows how many times the total number of shares applied for compares with the number of shares offered.
Example
Suppose a company offers 1,00,000 shares in its IPO, and investors apply for a total of 3,00,000 shares. This means the IPO is subscribed 3 times, because the demand is three times the number of shares available.
If investors apply for only 80,000 shares, the IPO is subscribed 0.8 times, which means it is undersubscribed.
Caution
A high subscription number shows strong demand, but it does not guarantee that the shares will list at a gain or that you will receive an allotment.