Oversubscription and Undersubscription are terms related to the issuance of shares during an Initial Public Offering (IPO) or similar events, reflecting demand levels. Oversubscription occurs when the number of shares applied for by investors exceeds the number of shares offered by the company, indicating high demand and investor interest. Undersubscription, however, happens when the number of shares applied for is less than the shares offered, signaling low demand or limited investor interest.

What is Oversubscription?

Oversubscription occurs when a service provider allocates more resources than are actually available, banking on the assumption that not all users will need the resources at the same time. This is common in environments where bandwidth, server capacity, or financial products are involved.

Examples of Oversubscription:

1. An internet service provider (ISP) sells more bandwidth than the system's capacity, expecting that not all users will use their maximum allocated bandwidth simultaneously.
2. A cloud service provider offers more virtual servers than the physical servers can handle under maximum load, expecting average usage to be well below capacity.

What is Undersubscription?

Undersubscription happens when the resources allocated are less than what is available. This results in underutilized systems, which can be inefficient from a business perspective but may guarantee better performance for users.

Examples of Under subscription:

1. A company maintains a large server infrastructure that is rarely at full capacity, ensuring they can handle unexpected surges in demand without any performance degradation.
2. A webinar platform has the capacity to handle 1,000 concurrent users but only sells access to 500 users, ensuring that everyone can connect without issues even if everyone attempts to join.

Difference Between Oversubscription and Undersubscription:

Basis	Oversubscription	Undersubscription
Definition	Allocating more resources than available, assuming not all will be used simultaneously.	Allocating fewer resources than available, ensuring unused capacity.
Key Effect	Can lead to congestion and degraded service if many users access the service at once.	Leads to high reliability and performance but may result in wasted resources.
Risk	High risk of performance issues and customer dissatisfaction.	Low risk of performance issues; higher operational costs.
Management Strategy	Often used to maximize profits and efficiency in resource usage.	Used to maximize system performance and user satisfaction.
Common in	ISPs, cloud services, shared hosting.	Premium services, dedicated hosting, enterprise environments.
Financial Aspect	More profitable if managed correctly, as it sells more than actual capacity.	Less profitable due to underutilization, but guarantees service quality.