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Notes on tech

Notes on technology, business, enterpreneurship, economy, markets along with interesting general tidbits.

Green shoe option

5/29/2006 05:40:00 AM, posted by anand

I was going through the prospectus of an upcoming IPO and ran into a term called "Green Shoe Option". Curious to find out what it meant, I did some search queries and found:
A green shoe option is a clause contained in the underwriting agreement of an initial public offering (IPO). The green shoe option, which is also often referred to as an over-allotment provision, allows the underwriting syndicate to buy up to an additional 15% of the shares at the offering price if public demand for the shares exceeds expectations and the stock trades above its offering price.

The Green Shoe Company was the first issuer to allow the over-allotment option to its underwriters, hence the name.

If you keep your mind open you will always learn something new everyday.
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