Greenshoe Option


Greenshoe Option
A provision contained in an underwriting agreement that gives the underwriter the right to sell investors more shares than originally planned by the issuer. This would normally be done if the demand for a security issue proves higher than expected. Legally referred to as an over-allotment option.

A greenshoe option can provide additional price stability to a security issue because the underwriter has the ability to increase supply and smooth out price fluctuations if demand surges.

Greenshoe options typically allow underwriters to sell up to 15% more shares than the original number set by the issuer, if demand conditions warrant such action. However, some issuers prefer not to include greenshoe options in their underwriting agreements under certain circumstances, such as if the issuer wants to fund a specific project with a fixed amount of cost and does not want more capital than it originally sought.

The term is derived from the fact that the Green Shoe Company was the first to issue this type of option.


Investment dictionary. . 2012.

Look at other dictionaries:

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  • greenshoe option — option that allows the underwriter for a new issue to buy and resell additional shares. Bloomberg Financial Dictionary * * *    A provision in the underwriting agreement for a share issue that allows the sale of additional shares to the public if …   Financial and business terms

  • Greenshoe Option — A means of stabilising a new issue. The manager of the issue takes a short position in the stock which is covered by an option on new shares to be issued by the company. If the share price after the issue rises above the exercise price of the… …   Financial and business terms

  • greenshoe option —   Etimologicamente significa scarpa verde , poiché così si chiamava la prima società a utilizzarla a Wall Street. E chiamata altresì opzione di sovrallocazione od in inglese opzione di overallotment . La greenshoe option consiste in una riserva… …   Glossario di economia e finanza

  • greenshoe option — green shoe or greenshoe option Fin an option, offered by the company raising the capital for the issue of further shares to cover a shortfall in the event of overallocation. It gets its name from the Green Shoe Manufacturing Company which was the …   The ultimate business dictionary

  • Reverse Greenshoe Option — A provision contained in an public offering underwriting agreement that gives the underwriter the right to sell the issuer shares at a later date. The reverse greenshoe option is used to support the price of a share in the event that after the… …   Investment dictionary

  • greenshoe — green‧shoe [ˈgriːnʆuː] noun [uncountable] FINANCE when a financial institution sells all the available shares in a company s share issue or secondary and then sells more, or the number of shares sold in this way; = OVERALLOTMENT: • The issue will …   Financial and business terms

  • greenshoe — option An option given by an issuer of securities to an underwriter entitling the latter to buy and sell extra shares in an issue if there is high public demand. The term derives from the first company to provide such an arrangement, the Green… …   Big dictionary of business and management

  • Greenshoe — A greenshoe (sometimes green shoe ), legally called an over allotment option (the only way it can be referred to in a prospectus), gives underwriters the right to sell additional shares in a registered securities offering at the offering price,… …   Wikipedia

  • Greenshoe-Element — Eine Greenshoe Option (auch Over allotment Option oder Mehrzuteilungsoption) ist eine Wertpapierreserve eines Emittenten, sprich einer Aktiengesellschaft, bei einem Börsengang im Rahmen eines Bookbuilding Verfahrens. Genauer handelt es sich um… …   Deutsch Wikipedia


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