Anchor investors

Anchor investors

Subject – Economy

Context – Anchor investor exits, Paytm shares spiral to hit all-time low

Concept –

• Anchor investors are institutional investors who are allotted shares just before an IPO opens for subscription.
• All anchor investors are bound by a lock-in period since they get a confirmed allotment of a company’s shares.

Who are Anchor Investors?

• Institutional investors, like retail investors, have the option to start bidding for an IPO-bound company’s shares when it opens for subscription.
• In addition, institutional investors also have an option to bid for shares at a pre-determined price band a day before the IPO opens for subscription.
• In such a scenario, these institutional investors are termed as anchor investors.

What is lock-in period for anchor investors?

• Anchor investors are guaranteed an allotment of shares a day before the IPO subscription process starts.
• Since they already acquire shares before the IPO subscription process, they are bound to hold the shares during the lock-in period and are not allowed to sell them before that.
• At present, the shares issued to anchor investors are locked in for a period of 30 days from the date of allotment. While market regulator Securities and Exchange Board of India (Sebi) has proposed a longer lock-in period of 30 days, the present duration continues to be 30 days.
• The lock-in period disallows anchor investors from suddenly selling shares, preventing fluctuations in share value for a limited period of time after a company is listed in the primary markets.