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 greenshoe option was exercisable until May 15, 2002 and has added a further amount of $135,000 to the proceeds.
In addition, the syndicate has been granted a greenshoe option of up to 435,000 shares.
The underwriters have a greenshoe option to subscribe an additional 2,475,000 class O shares to cover over-allotments.
If the greenshoe option is fully exercised, the interest of ING in Libertel will be 5%.
The prospectus further qualifies the distribution of 1,700,000 common shares (the "Treasury Shares") of the Company for sale on a guaranteed best efforts agency basis, and a greenshoe option for an additional 255,000 common shares of the Company to satisfy any oversubscriptions of Treasury Shares.
The company also announced that the Greenshoe Option was exercised yesterday by the underwriter, with an additional 375,000 shares sold.
The issue, initially for 75m, received encouraging response from subscribing banks and necessitated the exercise of the greenshoe option of $25m.
The issue will have a greenshoe option for an additional USD21.
SA1/4dzucker AG will also make shares available for a greenshoe option, which will not exceed 15% of the total shares offered.
On the Neuer Markt, Waldorf-based SAP consultancy and integrator RealTech AG will be coming to market after an IPO of a million shares, including a 100,000-share greenshoe option for over-allocation.
Nalco Holding Company (NYSE:NLC) today announced the underwriters of its secondary stock offering have exercised their so-called Greenshoe option to purchase an additional 4.
85% of its shareholding interest, as part of the greenshoe option which involves 15% of the Global Offering.