General
greenshoe
What does greenshoe mean?
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."
Origin
Named after the Green Shoe Manufacturing Company (now Stride Rite), the first IPO in 1919 to use the option.
Frequently asked questions
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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