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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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