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IPO green shoe option

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 usha asked about 3 years ago

What is an IPO green shoe option?

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7 Answers
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Ashika answered almost 3 years ago

Hiii Meaning A green shoe option means that an underwriter of a security can choose to sell more stocks of the company going for IPO if the demand of the stocks exceeds the number of stocks made available for the offerring. Underwriters also sometime help the Corporate in determining the issue price and the kind of equity dilution i.e. how many shares will be made available for the public. A Green Shoe, also known by its legal title as an “over-allotment option” (the only way it can be referred to in a prospectus), gives underwriters the right to sell additional shares in a registered securities offering if demand for the securities is in excess of the original amount offered. The Green Shoe can vary in size up to 15% of the original number of shares offered. This option is also called the over-allotment option. he investment banks and brokerage agencies (the underwriters) that take part in the greenshoe process have the ability to exercise this option if public demand for the shares exceeds expectations and the stock trades above the offering price Benefits One of the benefits of using the greenshoe is its ability to reduce risk for the company issuing the shares. It allows the underwriter to have buying power in order to cover their short position when a stock price falls, without the risk of having to buy stock if the price rises. In return, this helps keep the share price stable, which positively affects both the issuers and investors. RegulationsThe company which wants to issue share through Green shoe otion has to comply the regulation and rules of 1. SEBI 2.Securities Contract regulations act 3. The companies act 2013 (Earlier1956 ) 4.FEMA

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 narahari answered almost 3 years ago

Green Shoe option means an option of allocating shares in excess of the shares included in the public issue and operating a post-listing price stabilizing mechanism for a period not exceeding 30 days in accordance with the provisions of Chapter VIIIA of DIP Guidelines, which is granted to a company to be exercised through a Stabilizing Agent.

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Data?1494421730 rohit awasthi answered about 3 years ago

Dear Friend You can Read blogs on this topic on CAKART [Green Shoe IPO] [Green Shoe Option] Follow these link to read blogs Thanks https://www.cakart.in/blog/ipo-green-shoe-option/ https://www.cakart.in/blog/what-is-an-ipo-green-shoe-option/

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 veeru answered about 3 years ago

A provision contained in an underwriting agreement that gives the underwriter the right to sell investors more shares than originally planned by the issuer. This would normally be done if the demand for a security issue proves higher than expected. Legally referred to as an over-allotment option.

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Open uri20170510 32134 tcchcu?1494421832 Jitendra Suthar answered about 3 years ago

Hiiii friend.... **IPO - Green Shoe Option** Companies that want to venture out and start selling their shares to the public have ways to stabilize their initial share prices. One of these ways is through a legal mechanism called the greenshoe option. A greenshoe is a clause contained in the underwriting agreement of an initial public offering (IPO) that allows underwriters to buy up to an additional 15% of company shares at the offering price. The investment banks and brokerage agencies (the underwriters) that take part in the greenshoe process have the ability to exercise this option if public demand for the shares exceeds expectations and the stock trades above the offering price. Thanks & Regards,

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 lochan answered about 3 years ago

**GREEN SHOE OPTION** Green Shoe option means an option of allocating shares in excess of the shares included in the public issue and operating a post-listing price stabilizing mechanism for a period not exceeding 30 days in accordance with the provisions of Chapter VIIIA of DIP Guidelines, which is granted to a company to be exercised through a Stabilizing Agent. This is an arrangement wherein the issue would be over allotted to the extent of a maximum of 15% of the issue size. From an investor's perspective, an issue with green shoe option provides more probability of getting shares and also that post listing price may show relatively more stability as compared to market. Thanks

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Open uri20170510 32134 8wx65y?1494421689 Charan Reddy answered about 3 years ago

DEFINITION OF 'GREENSHOE OPTION' A provision contained in an underwriting agreement that gives the underwriter the right to sell investors more shares than originally planned by the issuer. This would normally be done if the demand for a security issue proves higher than expected. Legally referred to as an over-allotment option. A greenshoe option can provide additional price stability to a security issue because the underwriter has the ability to increase supply and smooth out price fluctuations if demand surges.

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