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    What is a Green-shoe Option?

    Synopsis

    A Green Shoe option allows the underwriter of a public offer to sell additional shares to the public if the demand is high.

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    The option is a clause in the underwriting agreement, which allows the company to sell additional shares, usually 15 per cent of the issue size.
    Under a green shoe option, the issuing company has the option to allocate additional equity shares up to a specified amount.

    A Green Shoe option allows the underwriter of a public offer to sell additional shares to the public if the demand is high.

    The option is a clause in the underwriting agreement, which allows the company to sell additional shares, usually 15 per cent of the issue size (in case of IPO), to the public if the demand exceeds expectations and the stock trades above its offer price.



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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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