Anchor investor
Topic: Financial Markets, Instruments, Insurance and Pensions · NCERT: Beyond NCERT
Meaning
An anchor investor is a Qualified Institutional Buyer (QIB) that is allotted shares one day before an IPO opens to the public. A QIB is an institution judged expert enough to assess such investments, such as a bank, mutual fund, insurer or pension fund. Big institutions committing money early tells ordinary investors that the issue is trustworthy. To prevent anchors from selling immediately after listing, their shares are locked in (they cannot be sold for a fixed period).
Example
Anchors can take up to 60% of the QIB portion of an IPO. Half of their shares are locked in for 30 days and the other half for 90 days. For example, a mutual fund buys shares as an anchor on the day before a company's IPO opens.
Don't confuse with
- QIB portion: QIBs as a group get up to 50% of a book-built issue. Anchors are only a part of this QIB portion, allotted earlier and subject to a lock-in.
Related concepts
- Primary market
- Initial Public Offering
- Red herring prospectus
- Book building
- Qualified Institutional Buyer
- Application Supported by Blocked Amount
- Green shoe option
- Underwriting
- Grey market premium
- Follow-on Public Offer