Greenshoe Option 绿鞋期权

Greenshoe Option 绿鞋期权

A greenshoe option is designed to smooth price fluctuations during initial public offerings. The mechanism allows underwriters to get from the issuing company an additional 15 percent of its shares at the offering price and sell them to investors within a certain period of the IPO when demand surpasses expectations. Underwriters can choose not to exercise the option, in which case they need to buy shares back from the secondary market and deliver them to strategic investors who have bought shares but not received them. This happens when the company starts trading below its offering price level and can support its share price by increasing demand. The name comes from Green Shoe Manufacturing Co., which first used the arrangement in 1963. The legal term for greenshoe option is "over-allotment option."