In the public offering of an IPO, the applicant is not guaranteed success in obtaining the IPO shares. In fact, IPO shares are given out based on balloting system. So how does that work? How can you increase your chances?

In IPO balloting, it is a pure random balloting system. What this mean is that those who applied for the IPO earlier do not get any special priority. It is however, based on the number of shares you have applied during the IPO.

Refer to this balloting result document (For the IPO application of Centraland).IPO balloting results are only released AFTER the IPO application and selection is over. So it will not help you in deciding how much to ballot.

In the IPO offer document and the balloting results, it states that the number of offer shares available is 5,000,000 shares. That is the only number we are concerned with. Also, in the document it wrote that applications for 11,860,000 offer shares were received. This basically mean that for every 1 share available, 2.372 share applications were made.

One other important part of the IPO balloting result you look look at is the balloting ratio and how it is segregated.

Let's look at the first row. What this mean is that, if you applied for 1,000 IPO shares at the ATM or through internet banking, your balloting ratio is 65:88. This mean that out of 88 people who applied for this category, 65 of them would get it. The next column, "No. of offer shares alloted per successful applicant", says that, if you managed to be the 65, you would get 1 share for your application.

Same applies for the other categories. Let's just look at another example.

For the 50 to 99 category, in order to qualify for this category, you need to have applied between 50-99 lots (or per thousand shares) at the ATM or internet banking. Your chances of successfully getting the shares is 80 out of 88. And if you are successful for your application, you would get 25 lots.

As you can see, your chances increases when you switch to a higher category. Also, the number of shares alloted is also higher. This is generally true for most IPOs. Most of the time, the range for the categories are similar among the other IPOs. (i.e, 1, below 10, below 50, below 100, below 500, below 1,000)

Thus, a way of increasing your chances of getting an IPO is to apply for the higher category. Or just apply 1 lot more than a round number to be safe.. (Eg: 11 lots instead of 9 lots)

However, looking at the balloting results, one may think it is really easy to get an IPO successfully. That's not true. One of the reasons why it is so easily obtainable for Centraland is because of the general market sentiments. Looking just a few months back in Sept 2007, you can see how much harder it is to get a successful IPO application. (See Fuxing's IPO balloting results here.)

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