Greenshoe option

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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.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
References in periodicals archive ?
VectoIQ Acquisition Corp has completed the sale of 3,000,000 additional units under the 45-day over-allotment option granted to the underwriters in its initial public offering (IPO), at USD10.00 per unit, generating additional gross proceeds of USD30m, it disclosed on Tuesday.
Global Banking News-November 6, 2017--Sachem Capital closes over-allotment option shares
M2 EQUITYBITES-February 6, 2018-Gates Industrial Corporation closes over-allotment option at IPO of USD19.00 per share
Net proceeds after discounts, commissions and expenses, and exclusive of accrued interest on the notes from October 15, 2012 and the underwriters' over-allotment option, were approximately USD43.1m.
Global Banking News-21 January 2010-Bar Harbor Bankshares over-allotment option exercised(C)2010 ENPublishing - http://www.enpublishing.co.uk
M2 EQUITYBITES-November 7, 2017-Sachem Capital closes over-allotment option shares
First PacTrust said that the underwriters have exercised in full their over-allotment option in respect of an additional USD 6.75m aggregate principal amount of the notes.
Global Banking News-16 December 2009-Lakeland Financial announces closing of over-allotment of stock offering(C)2009 ENPublishing - http://www.enpublishing.co.uk
M2 EQUITYBITES-November 6, 2017-Sachem Capital closes its over-allotment option for 562,500 common shares to raise additional USD2.3m