Greenshoe option

Greenshoe option

 Option that allows the underwriter for a new issue to increase the size of the issue because of high demand for the shares.

Greenshoe Option

A provision in some underwriting contracts allowing the underwriter to sell more shares to investors than were originally agreed. In an underwriting agreement, the underwriter agrees with the issuer of a security to place a certain amount with investors. If demand for the security exceeds the underwriter's supply, the greenshoe option allows the underwriter to avoid a sudden jump in price by increasing supply. Normally, the greenshoe option allows the underwriter to increase supply up to 15%. It is important to note that not all underwriting contracts have greenshoe options, especially in situations in which the issue is for a limited project for which the issuer only needs a certain amount of capital. It is also called an overallotment option.
References in periodicals archive ?
The CP issue received an overwhelming response from the investors and was oversubscribed by more than 80 percent of the issue size excluding greenshoe option.
The underwriters exercised a so-called greenshoe option to sell an additional 48 million American depositary shares, said the person, who asked not to be identified as the information is private.
As part of the exercise of the greenshoe option, the underwriters bought 874,999 shares of common stock in Chy's at a price of USD13.
During the capital increase, the firm will issue 684,210 new shares, which may be raised up to 786,841 shares if the greenshoe option is exercised.
9m) and the selling stockholders sold 3,268,665 shares, including the greenshoe option for 1.
Summary: The bookrunners of MHP (MHPC LI) majority shareholderEoACAOs sale exercised their greenshoe option for 1.
The firm opened the share sale on April 29 to raise USD80m with a greenshoe option to further raise USD30m.
The company has the greenshoe option to raise the issue volume by up to EUR 35 million.
The issue has a greenshoe option of INR1bn, it said.
The issue also includes a greenshoe option of 150 million francs (pounds 15.
The IPO includes 180,000 shares in the greenshoe option, which was exercised after the issue was oversubscribed.