Equal vs. Proportional Allocation in Korean IPO Subscriptions — How Your Deposit Determines Your Shares

Same Deposit, Different Number of Shares — Why?

On the first day of subscription for a hot new listing, Korean brokerage apps display two separate numbers side by side: shares from "equal allocation" and shares from "proportional allocation." You've probably seen accounts where someone who put in the bare minimum still walked away with a few shares, while someone who deposited tens of millions of won got only a handful more. In other cases, allocation scales up almost linearly with how much money went in. That split isn't random — it's the product of two allocation mechanisms running side by side. IPO Lockups covered what happens to shares after listing, once restrictions come off. This lesson goes one step earlier: how the subscription system decides, before a single share trades, who gets how much in the first place.

What an IPO Subscription Actually Is — And How It Differs From Buying an Already-Listed Stock

An IPO subscription is a request to be allocated newly issued shares (or existing shares sold by current holders) of a company that hasn't listed yet, at a fixed offering price set ahead of time. This is fundamentally different from buying shares on the exchange after listing. Post-listing trades execute instantly at a live market price; a subscription, by contrast, happens before any market price exists — you apply at a single offering price determined through institutional bookbuilding, and you only find out how many shares you actually received once the allocation results come out days later. There's no guarantee you'll get everything you applied for. For popular offerings, total demand routinely exceeds the shares actually available, so subscribers typically receive only a fraction of what they requested, with the rest of their deposit refunded. That "who gets which fraction" question is exactly what equal allocation and proportional allocation are designed to answer.

The Big Picture — How Shares Are Split Between Institutions and Individuals

Before getting into the two retail allocation methods, it helps to see how the total offering gets divided in the first place. Shares are allocated across three buckets: institutional investors, the company's own employee stock ownership plan, and general (retail) subscribers. Institutions participate in the bookbuilding process — submitting price and quantity indications that help set the offering price — and in exchange for typically agreeing to hold their shares for six months to a year, they receive a larger share of the offering. Retail subscribers, who can only apply at a price already fixed by that point, are instead guaranteed a minimum floor of the total offering. Following a late-2020 regulatory overhaul by Korea's financial authorities, that retail floor was raised in stages — from 20% to 25%, and up to 30% the following year — and the rules governing how that larger retail pool gets split among individual subscribers were rewritten at the same time. Equal and proportional allocation are exactly those rules: how the retail pool gets divided among individual investors.

It's also worth noting the retail pool isn't split only into these two tracks. Some brokerages set aside a portion of retail shares for investors holding high-yield bond funds, giving them priority allocation, and KOSDAQ listings sometimes carve out a separate priority track for subscribers in KOSDAQ venture funds, as a way to encourage capital into growth companies. Those tracks only apply to investors already holding the relevant product, though — the two mechanisms nearly every retail subscriber actually encounters are equal and proportional allocation, so that's the focus here.

Equal vs. Proportional at a Glance

	Equal allocation	Proportional allocation
Basis	Number of subscribers meeting the minimum unit	Size of your subscription deposit
Effect of deposit size	No effect once you clear the minimum	Scales roughly linearly with deposit
How shares are assigned	Lottery draw when demand exceeds supply	Pro-rata calculation based on deposits
Favors	Small retail subscribers	Investors with more capital
Origin	Introduced in the 2021 reform to widen retail access	The traditional allocation method

Equal Allocation — Same Odds Regardless of How Much You Put In

Equal allocation gives every subscriber who meets the minimum subscription unit (commonly around 10 shares, though it varies by broker and offering) the same shot at shares, completely independent of how much money they deposited. If the shares set aside for equal allocation exceed the number of qualifying subscribers, everyone gets at least one share. If more people qualify than there are shares to go around, the brokerage runs a lottery and winners receive one share each (or their pro-rata share of the equal-allocation pool, split evenly). The core point: whether you deposit 10 million won or just the bare minimum, your odds in the equal-allocation draw are identical. The reasoning behind this is straightforward — under the old system, where allocation ran on deposit size alone, wealthier investors had a structural edge. Equal allocation was introduced specifically to guarantee smaller retail investors a genuine shot at participating.

Proportional Allocation — You Get Back What You Put In, Scaled

Proportional allocation distributes shares based on each subscriber's deposit, after subtracting whatever portion was already used for the equal-allocation calculation. Someone who deposits 100 million won ends up with roughly ten times the proportional allocation of someone who deposits 10 million won on the same offering. The math works like this: divide the shares set aside for proportional allocation by the combined deposits of everyone in that pool, which yields a ratio — shares allocated per unit of deposit. Multiply your own deposit by that ratio, and that's your allocation. The inverse of that ratio is what gets reported in the news as the "subscription competition ratio." For example, if the proportional pool is 1 million shares and total deposits across all proportional subscribers add up to the equivalent of 100 million shares at the offering price, the competition ratio is 100:1, and someone whose deposit corresponds to roughly 10 million won worth of shares at the offering price would receive around 10 shares. Because share counts don't come out in fractions, any leftover fractional allocation typically gets resolved through a supplementary lottery.

A Worked Example — How the Numbers Actually Shake Out

Take a hypothetical IPO for Company E. The retail allocation totals 400,000 shares, split evenly: 200,000 for equal allocation, 200,000 for proportional. The offering price is 20,000 won per share, and the deposit requirement is 50% of the subscription value (deposit = offering price × shares requested × 50%). Suppose 50,000 people qualify for equal allocation — dividing 200,000 shares among 50,000 people works out to an average of four shares each, but in practice brokerages typically run a lottery awarding one share per winner to anyone who cleared the minimum unit (say, 10 shares), so even minimum-unit subscribers can end up as winners or losers in a hot offering. On the proportional side, say Investor A requests 1,000 shares and deposits 10 million won (20,000 won × 1,000 shares × 50%). If total deposits across the proportional pool reach 20 billion won, A's deposit represents 0.05% of the total, translating to roughly 100 shares out of the 200,000-share pool. If competition intensifies and total deposits reach 200 billion won instead, that same 10-million-won deposit now yields only about 10 shares, with the deposit corresponding to the other 990 shares (roughly 9.9 million won) refunded once subscription closes.

The Subscription Timeline — From Application to Refund

The process runs in four stages. First, before subscribing, check the offering price range and bookbuilding schedule in the registration statement and prospectus, then open a subscription account with the lead underwriter(s) and apply during the fixed subscription window (typically two business days), paying the required deposit (commonly around 50% of the subscription value at the offering price, though this varies by deal). You can only apply in multiples of the minimum unit, and each brokerage caps how many shares an individual can request — anything above that cap simply can't be submitted. Second, once subscription closes, the brokerage calculates equal and proportional allocations separately and finalizes each subscriber's shares, typically announcing results the next business day. Third, deposits corresponding to unallocated shares are refunded, usually two business days after subscription closes — a schedule that's entirely separate from the listing date, so don't assume the refund and the listing happen together. Fourth, allocated shares are credited to your account on the listing date itself, and that's when you can actually trade them on the exchange.

What to Check Before You Subscribe

Understanding the allocation mechanics is only part of the picture. A few other things are worth checking before subscribing. First, look at the institutional competition ratio from bookbuilding and whether the final offering price landed at the top or bottom of the indicated range — that tells you how enthusiastically institutions priced the deal. Second, a higher share of institutional investors committing to lock-up periods is generally a good sign for post-listing supply pressure, tying directly into the overhang concept covered in IPO Lockups. Third, whether to aim only for the equal-allocation minimum or commit more capital to chase proportional shares is purely a function of your own available capital and the offering's expected competition ratio — neither approach is categorically better. Fourth, some offerings let you subscribe through multiple underwriting brokerages simultaneously, each running its own equal and proportional pools, so it's worth checking how many brokerages are actually offering the deal. None of this changes the underlying risk, though: like any newly listed stock, an IPO can trade below its offering price once it starts trading.

Key Takeaways

• An IPO subscription is a request for shares at a fixed pre-listing offering price, with no guarantee you'll receive everything you apply for — a sharp contrast with buying an already-listed stock.
• Retail allocation splits into equal allocation, which gives every qualifying subscriber the same odds regardless of deposit size, and proportional allocation, which scales with deposit size.
• The proportional competition ratio is set by total deposits relative to available shares — the higher the ratio, the fewer shares the same deposit buys you.
• The subscription deposit is typically about half the requested amount at the offering price; unallocated deposits are refunded roughly two business days after subscription closes, on a schedule separate from the listing date.
• Understanding the allocation mechanics doesn't change the underlying risk — an IPO, like any stock, can trade below its offering price after listing.

FAQ

Can I just apply for the minimum and only go after equal allocation?

Yes. Since equal allocation odds don't depend on deposit size, applying for just the minimum unit purely to compete for the equal-allocation pool is a common approach. Keep in mind that popular offerings can still have long odds even in the equal-allocation lottery.

Does subscribing through multiple brokerages improve my odds?

When several brokerages are part of the underwriting syndicate for the same IPO, each one runs its own separate equal and proportional allocation pools. Opening accounts at multiple participating brokerages and subscribing through each can improve your equal-allocation odds — though it also means more account setup and capital to manage across brokers.

Is it possible to get zero shares even after paying the full deposit?

Yes. You can lose the equal-allocation lottery entirely, and in a highly competitive proportional pool, your calculated allocation can round down to zero shares. In either case, your full deposit is refunded on the scheduled refund date.

⚠️ This lesson is for informational and educational purposes only and is not investment advice for any specific stock. Deposit ratios, allocation splits, refund timelines, and similar details vary by offering, brokerage, and regulatory change, so always confirm the specifics with your brokerage's notices and the official prospectus before subscribing. Investment decisions and their outcomes are the investor's own responsibility.