If demand during placement exceeds the issue volume, the organizer distributes securities proportionally or according to established rules. Allocation shows what portion of the application was executed: with 20% allocation, an investor who submitted an application for 10 million sum will receive securities worth 2 million, with the remainder returned to their account.
The allocation size is unknown in advance and depends on oversubscription. Rules may vary: in some cases, smaller applications are satisfied more fully, while in others institutional investors or clients of a specific broker receive priority.
Low allocation is a sign of strong demand, but not a standalone reason to buy. Attempting to receive more securities by submitting an intentionally inflated application is risky: with unexpectedly high allocation, an investor risks obtaining a position significantly larger than what fits their portfolio.