Minimum order quantity stands for the minimum amount of shares that have to be purchased to secure an IPO investment. However, an investor purchasing bare minimum shares in a package are coined as market lot size.
IPO’s are great investment opportunities that offer investors and traders a long term investment scheme for significant returns. However, in the universe of IPO’s, specific terminologies many aren’t aware. Two of them happens to be the market lot size and minimum order quantity.
Market Lot Size
When a company files for an IPO, its determine the market let size, which comprises the total number of shares that come in a lot. It could be five shares, ten shares or 1000 shares per lot depending upon the company’s size. They are the standard operating method for investing in an IPO.
Minimum Order Quantity
The minimum order quantity is defined as the minimum shares an investor has to purchase to ensure that they have an investment in the company. It directly co-insides with market lot size as it’s the bare minimum shares that have to be purchased.
To understand market lot size and minimum order quantity in an IPO in a better tonality, we have an example illustrated below.
Company – XYZ
Price per share – 35 rupees.
Market lot – 150 shares.
Minimum order quantity – 150 shares.
Thus the investor can apply for an IPO through the following.
At 35 rupees per share = 35* 150 shares* one lot = 5250 rupees
At 35 rupees per share = 35* 150 shares * 2 lots = 10,500 rupees
At 35 rupees per share = 35* 150 shares * 20 lots = 1,05,000 rupees.
From the above-given example; we can understand that 35 rupees in the price per share, 150 shares is the minimum order to be placed and the “lots” are the number of lots investors are looking to purchase. But do keep in mind that you will have to carry out extensive research before buying a minimum order quantity as they aren’t cheap in any way possible.
Bottom line
Market lot size and minimum order quantity define how big or small the company is. If the minimum order quantity is high, investing in the company for a long term can be a feasible option. If not, investing in lower minimum order quantities and selling them to profit in the short term is a viable option.