What It Means
An anchor investor is a large institutional investor, typically a mutual fund, insurer, or pension fund, allotted IPO shares a day before the issue opens to the public, at a price the company fixes in advance.
How It Works
Anchor allotments come out of the QIB quota, with up to 60% of that quota reserved for anchors at the time of writing (SEBI revises this periodically, so check the current rule before relying on it). Anchor shares also carry a mandatory lock-in, split into two tranches, currently 50% for 30 days and the remaining 50% for 90 days from allotment. A strong, well-known anchor book is one of the biggest sentiment drivers behind GMP, since it signals big institutions are confident enough to commit money a full day before anyone else can.
Warning
A big anchor book is a confidence signal, not a guarantee. Anchor investors can and do sell once their lock-in ends, sometimes at a loss.
Related Terms
- QIB (Qualified Institutional Buyer): the broader category anchor investors are allotted from
- GMP (Grey Market Premium): anchor demand is one of the factors that moves it
- What Is GMP in IPO? Should You Trust Grey Market Premium?: where anchor allocation is covered as a GMP driver