noun
General Slang
Greenshoe
· noun · finance
IPO option letting underwriters sell up to 15% extra shares to steady the price.
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Definitions
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Formally the over-allotment option. Lets underwriters sell up to 15% more shares than originally offered if demand is hot, then buy them back in the open market to prop the price if it tanks. Stabilisation dressed up as flexibility.
“Demand was off the charts so the bankers exercised the greenshoe in full on day one.”
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Greenshoe In A Sentence
Demand was off the charts so the bankers exercised the greenshoe in full on day one.
Origin & Usage
Named after the Green Shoe Manufacturing Company (now Stride Rite), the first IPO in 1919 to use the option.
People Also Ask
What does Greenshoe mean in finance?
A Greenshoe is an IPO option that lets underwriters sell up to 15% extra shares to help steady the price.
Where does the term Greenshoe come from?
It's named after the Green Shoe Manufacturing Company, the first firm whose IPO used this over-allotment option.
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