Why Do Institutional Investors Usually Get The Lions Share Of Flotation Shares In Public Companies

[barney15c]

Case in point 'Royal Mail' where the shares are likely to be oversubscribed many times over. Why do Institutional investors by right get the largest proportion of shares instead of smaller investors. They are bound to make a quick killing for little to no effort and little financial risk.
I know very little about shares and how they work but it seems that the fat cats always get priority when it comes to a good deal.

[joggerjayne]

Because they are playing with other people's money, so they have the financial power to apply for the most lucrative volumes of share allocations?

[factor-fiction]

I don't think they do.
I recall set proportions were put aside for retail investors, institutions staff, some to be retained by government and a proportion for private investors. The government wants lots of small shareholders to have a stake in the company.
The institutions will include pension funds and I doubt they will sell up quickly- these are likely to be good value in the long term and will generate good dividends of 6%+. And of course these pension funds equate to our money (if we have a pension fund), so it's good news if they have some RM shares.
Among private investors those applying for the minimum figure of £750 will get all their allocation but larger investors will have theirs scaled back, with those trying to invest over £10000 getting nothing, so the smaller investors are doing well out of it compared to others.
The staff will do well out of it too. I think their shares were free.

Of course those organising the sale will have done very nicely in fees.