BizTerm Definition
Green Shoe
Full Definition

A typical underwriting agreement allows the underwriters to buy up to an additional 15% of shares at the offering price for a period of several weeks after the offering. This option is also called the over allotment and is exercised when the IPO is oversubscribed and trading above its offer price. The ability to buy additional shares also allows the underwriter to manage the aftermarket trading. The term comes from the Green Shoe Company, which was the first to have this option.

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