Allocation Notice

We'll get to what the term "allocation notice" means in a minute, but first a brief aside about IPOs. (Hint: allocation notices are related to IPOs.)

Companies begin trading their stocks by conducting something called an initial public offering, or IPO. This means that they set aside some of the company's stock, which is then made available to the public. Before it begins trading, though, some insiders and others with an inside track get offered shares. They can then sell the shares on the public market after the stock begins trading.

If a stock is popular, this can lead to a big payday for people who got this early IPO stock. For that reason, the line for these shares is often pretty long (figuratively, of course; rich people, like those with the inside track for IPO shares, rarely wait in actual lines).

When the IPO process is underway, potential investors put in their request for some of these early shares. Due to the popularity, there might not be enough shares available to fill every order completely.

Now we get to the term "allocation notice." An allocation notice represents how the investor finds out if their order will get filled, and if they will get the full amount they asked for or a partial order. Hence, investors are notified of their allocation (makes sense, right?).

Think about it as the part of a speed dating event where you find out if the people you picked also picked you. Only, in this case, you might find out that you could get 79% of a date.