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    Question

    In the context of securities issuance, 'Green Shoe

    Option' allows the underwriter to:
    A Sell additional shares to the public beyond the original issue size to stabilize the post-listing price. Correct Answer Incorrect Answer
    B Invest the issue proceeds in environmentally friendly projects. Correct Answer Incorrect Answer
    C Allot shares preferentially to the company's employees. Correct Answer Incorrect Answer
    D Withdraw the issue if the response is poor. Correct Answer Incorrect Answer

    Solution

    A Green Shoe Option (or over-allotment option) is a provision in an underwriting agreement that grants the underwriter the right to sell investors more shares than originally planned by the issuer if the demand for a security issue proves higher than expected. This helps in stabilizing the security's price in the secondary market.

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