Provisional Allotment: The Temporary Rights Credit That Shows Up in Your CDP Account Before You Decide to Subscribe
A provisional allotment is the temporary, tradeable entitlement a shareholder receives in a rights issue, representing the right to subscribe for new shares at the rights issue price, credited to the shareholder’s account before they decide whether to subscribe, sell, or let it lapse.
Not financial advice. All figures for educational reference only. Data as at October 2026.
Last updated: October 2026
Key Takeaways
- A provisional allotment is the rights entitlement itself — a placeholder credit showing how many new shares you’re entitled to subscribe for in a rights issue, before you take any action.
- It appears in your CDP or custodian account shortly after the rights issue’s record date, typically under a separate counter code from the main stock.
- You have three choices with a provisional allotment: subscribe and pay for the new shares, sell the entitlement on the market (if it’s renounceable/nil-paid tradeable), or let it lapse and receive nothing.
- Provisional allotments that are not acted on by the subscription deadline typically lapse worthless, meaning shareholders who ignore a rights issue notice can lose real economic value.
- The provisional allotment has its own trading counter during the “nil-paid rights” trading window, letting shareholders who don’t want to subscribe recover some value by selling the entitlement instead of letting it expire.
What Is Provisional Allotment?
When a company announces a rights issue, it needs a mechanism to tell each shareholder exactly how many new shares they are entitled to buy, before any money changes hands. This mechanism is the provisional allotment — a temporary, provisional credit that appears in a shareholder’s CDP or custodian account representing their entitlement, calculated based on their existing shareholding as at the rights issue’s record date and the announced subscription ratio (for example, 1 new share for every 5 existing shares held).
The word “provisional” is key: at this stage, the shareholder has not yet paid for or committed to the new shares. The allotment is simply notice of entitlement. What happens next depends on the shareholder’s decision during the subscription period — subscribe (pay and convert the provisional allotment into actual new shares), sell the entitlement to someone else (if the rights issue is renounceable), or take no action, in which case the provisional allotment typically lapses and becomes worthless.
This concept sits at the very start of the rights issue process, before the related mechanics of nil-paid rights trading, excess rights application, or final allotment of new shares come into play.
How Does Provisional Allotment Work in Singapore?
In a typical SGX renounceable rights issue, the timeline runs roughly as follows: the company announces the rights issue and sets a record date. Shortly after, eligible shareholders’ provisional allotments are credited to their CDP accounts under a temporary counter (often denoted with a suffix like “R” for rights). A nil-paid rights trading period then opens, during which shareholders can sell their provisional allotment on the open market if they don’t want to subscribe themselves.
If a shareholder decides to subscribe, they submit payment (through their broker, ATM, internet banking, or other accepted channels specified in the offer information statement) by the subscription deadline. Once payment is confirmed and processed, the provisional allotment converts into fully paid new shares, credited to the shareholder’s main holding.
If a shareholder does nothing — doesn’t subscribe and doesn’t sell the nil-paid rights during the trading window — the provisional allotment simply lapses at the end of the subscription period, and the shareholder receives nothing for it. This is one of the most common and costly mistakes retail investors make with rights issues: ignoring the notice entirely results in a real, avoidable loss of value if the rights were worth anything.
Provisional Allotment Example
An investor holds 10,000 shares in an SGX-listed company that announces a 1-for-5 renounceable rights issue at SGD 0.80 per new share, while the stock trades at SGD 1.00 pre-issue. The investor’s provisional allotment is 2,000 new shares (10,000 divided by 5).
This provisional allotment is credited to the investor’s CDP account as a temporary entitlement. The investor now has three choices: pay SGD 1,600 (2,000 shares × SGD 0.80) to subscribe and receive the new shares; sell the 2,000-share nil-paid rights entitlement on the market during the trading window, capturing roughly the difference between the market price and subscription price (theoretically around SGD 0.20 per right, or SGD 400 total, before costs); or do nothing and let the entire SGD 400 of embedded value lapse worthless.
Most financially literate investors choose option one or two — doing nothing is almost always the worst outcome when the rights have positive value.
Advantages of Provisional Allotment
Clear notice of entitlement. The provisional allotment gives shareholders an exact, unambiguous record of how many new shares they can subscribe for, removing any guesswork.
Flexibility before committing capital. Shareholders aren’t forced to pay anything upfront just because they hold the provisional allotment — they retain full optionality until the subscription deadline.
Tradeable value if renounceable. For renounceable rights issues, the provisional allotment itself has market value and can be sold, letting shareholders who don’t want to subscribe still capture some economic benefit.
Standardised, transparent process. SGX and CDP’s standardised rights issue mechanics mean every shareholder, retail or institutional, goes through the same clear process.
Proportional to existing holding. The allotment is always calculated fairly based on your existing stake, ensuring your percentage ownership right is preserved if you choose to subscribe in full.
Risks and Limitations
Lapses worthless if ignored. The single biggest risk is simply not acting — shareholders who don’t subscribe or sell during the window lose the entire value of their entitlement.
Dilution if you don’t participate. Choosing not to subscribe (even if you sell the nil-paid rights) still results in your percentage ownership of the company being diluted once the rights issue completes.
Short decision window. Subscription periods are typically only a few weeks, which can catch inattentive shareholders off guard, particularly those who don’t regularly check broker or CDP notifications.
Payment logistics can be confusing. Different brokers and custodians have different processes for accepting rights issue subscription payments, and missing a specific deadline or format requirement can invalidate an intended subscription.
Non-renounceable issues offer no sale option. If a rights issue is structured as non-renounceable, the provisional allotment cannot be sold at all — it’s subscribe or lose it entirely.
Provisional Allotment vs Rights Entitlement vs Excess Rights
| Concept | What It Represents | Can It Be Traded? |
|---|---|---|
| Provisional Allotment | Your initial entitlement credited after the record date | Yes, if renounceable (as nil-paid rights) |
| Rights Entitlement | General term for the right to subscribe, often used interchangeably with provisional allotment | Yes, if renounceable |
| Excess Rights Application | Applying for MORE shares than your basic entitlement, from the unsubscribed pool | No — it’s an application, not a tradeable instrument |
| Nil-Paid Rights | The tradeable form of the provisional allotment during the trading window | Yes, this is specifically the tradeable instrument |
Source: SGX/CDP rights issue mechanics, standard offer information statement terminology, October 2026.
The Bottom Line
A provisional allotment is simply the starting point of a rights issue — a temporary notice of your entitlement, not yet converted into real shares. The decision that matters is what you do with it before the subscription deadline: subscribe, sell, or lose it entirely. For any rights issue with positive embedded value, doing nothing is the one outcome worth actively avoiding.
Frequently Asked Questions
What's the difference between a provisional allotment and actual new shares?
A provisional allotment is just the entitlement notice — it only converts into actual, fully paid new shares once you subscribe and pay for them by the deadline.
What happens if I don't do anything with my provisional allotment?
It typically lapses at the end of the subscription period, and you receive nothing for it, even if it had real market value that could have been captured by selling or subscribing.
Can I sell my provisional allotment without subscribing myself?
Yes, if the rights issue is renounceable, your provisional allotment can be sold on the market as “nil-paid rights” during a specified trading window, letting you capture some value without paying for new shares.
Where do I see my provisional allotment?
It’s typically credited to your CDP account (or custodian account, if you hold shares through a broker’s nominee structure) under a separate temporary counter code shortly after the rights issue record date.
Is a provisional allotment the same for every shareholder?
The ratio is the same for all shareholders (e.g., 1-for-5), but the actual number of shares in your provisional allotment depends on how many shares you held as at the record date.
