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How Oversubscribed Deals Work on Percent

Percent gives investors the flexibility to state their investment amount and minimum APY (Annual Percentage Yield) when making an investment request for a fixed rate* deal. This allows for greater flexibility, giving investors greater control over the investing process and an increased likelihood of participating in a deal.

See How to Invest on Percent for additional information.

However, sometimes our private credit deals are popular to the extent that they become “oversubscribed.” This means there is more investment demand than the deal size, so all investment requests may not be filled. When the final APY is set by the borrower, investors who set a higher minimum APY than that rate may be excluded from the deal.

Maximizing Your Chances of Participating in a Deal

To avoid being excluded from a deal, investors can:

  • Set a lower minimum APY: In order to participate in the deal, your minimum APY must be lower than or equal to the final APY of the deal. To adjust the minimum APY of your investment request, navigate to the Deal page and use the investment form to edit your existing investment request.
  • Set an appropriate minimum investment amount: In addition to setting your investment request, you can also set a minimum investment amount. Setting a lower minimum investment amount, or choosing the one that is selected by default, will increase the chances of having at least part of your investment request fulfilled.

Let’s Look at an Example

To better understand how this works, we’ll walk through a hypothetical private credit deal:

Deal Details:

  • Initial Deal Size: $1,000,000
  • APY Options: 14%, 15%, 16%
  • Cumulative Demand by Minimum APY:
    • 14%
      • $500,000 (0.05x undersubscribed)
    • 15%
      • $2,000,000 (2.0x oversubscribed)
    • 16%
      • $3,000,000 (3.0x oversubscribed)

The underwriter or borrower was initially seeking $1M in funding. To achieve that goal, at the end of the funding period they selected 15% as the final APY, resulting in a 2x oversubscription rate. At 15%, the borrower could close the deal at any amount up to $2M.

If the deal closes for the maximum $2M amount, all investors that bid a minimum APY of 15% or less would receive a full allocation. However, if the underwriter or borrower only wants to raise $1M, then the majority of investors who selected an APY of 15% or lower will have their investment requests reduced by ~50% since there was excess demand (2x) for the deal. Investors who selected an APY greater than 15% will have their investment requests denied. Their money will be credited back to their Percent account and available for investment in other deals.

Oversubscription and Percent Blended Notes

An individual deal may be a component of Percent Blended Notes, our managed investments which provide diversified algorithmic exposure to all eligible notes on the platform. Percent Blended Notes have priority allocations for oversubscribed deals, so individual investment requests for a particular oversubscribed deal may be downsized further to accommodate the allocation to Percent Blended Notes. 

Interested in investing in Percent Blended Notes? Learn more today.

Our new investment process provides a more customizable and equitable way for investors to add private credit opportunities to their portfolios based on their risk tolerance and precise preferences. If you have any questions about our investment process or need help editing your existing investment request, please reach out to our Investor Relations team. They are always here to help.

*Investors cannot choose an APY for transactions that carry a variable rate, such as Percent Blended Notes

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