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green shoe

English translation: issue reserve

GLOSSARY ENTRY (DERIVED FROM QUESTION BELOW)
English term or phrase:green shoe
Selected answer:issue reserve
Entered by: John Kinory (X)

09:27 Jul 23, 2002
English language (monolingual) [PRO]
Bus/Financial
English term or phrase: green shoe
Has anyone every heard this expression used in Stock Exchange trading? What specifically does it refer to, please?
Parrot
Spain
Local time: 15:51
vedi sotto
Explanation:
Here are a couple of definitions:

Green Shoe An over-allotment option of an underwriting agreement which allows the syndicate the option to purchase additional shares at the original price. The green shoe can be as large as 15% of the original issue size.

Green Shoe
The green shoe is an instrument used to stabilize the stock price in the first few weeks after a corporation goes public. If the stock price rises sharply, the number of newly issued shares is increased. This issue reserve, or green shoe, usually amounts to 10% to 15% of the originally planned issue volume.

HTH
Cristina
Selected response from:

Bilingualduo
Italy
Local time: 15:51
Grading comment
Thanks, and very specially to Alison for the additional research!
4 KudoZ points were awarded for this answer



SUMMARY OF ALL EXPLANATIONS PROVIDED
4 +4vedi sotto
Bilingualduo
5 +2The name derives...
Alison Schwitzgebel


Discussion entries: 1





  

Answers


4 mins   confidence: Answerer confidence 4/5Answerer confidence 4/5 peer agreement (net): +4
vedi sotto


Explanation:
Here are a couple of definitions:

Green Shoe An over-allotment option of an underwriting agreement which allows the syndicate the option to purchase additional shares at the original price. The green shoe can be as large as 15% of the original issue size.

Green Shoe
The green shoe is an instrument used to stabilize the stock price in the first few weeks after a corporation goes public. If the stock price rises sharply, the number of newly issued shares is increased. This issue reserve, or green shoe, usually amounts to 10% to 15% of the originally planned issue volume.

HTH
Cristina

Bilingualduo
Italy
Local time: 15:51
Native speaker of: Native in EnglishEnglish, Native in ItalianItalian
PRO pts in pair: 14
Grading comment
Thanks, and very specially to Alison for the additional research!

Peer comments on this answer (and responses from the answerer)
agree  Enza Longo
6 mins
agree  Alison Schwitzgebel: commonly written in one word "greenshoe"
6 mins
agree  airmailrpl: both answerers deserve the points
1 hr
agree  MikeGarcia
3 hrs
Login to enter a peer comment (or grade)

20 mins   confidence: Answerer confidence 5/5 peer agreement (net): +2
The name derives...


Explanation:
...from the first company (The Green Shoe Manufacturing Company) to include such a feature in a publich offering).

Source: Moles & Terry, Handbook of International Financial Terms.

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Note added at 2002-07-23 09:51:18 (GMT)
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Also check out

\"CFOs considering an ini-tial public offering might be interested in a study on howover-allotment options (OAOs) affect underwriter profitsand aftermarket price stabilization. The OAO, also knownas a Green Shoe option (since it first appeared in GreenShoe Manufacturing Co.\'s 1960 offering) generally occurin firm-commitment underwritings. The underwriter mak-ing a firm commitment agrees to purchase a specifiednumber of shares, thereby shielding the issuer from theentire risk of an unsuccessful offering. (In a best-effortsarrangement, the firm does not assume any of the risk bur-den.) If the lead underwriter executes an OAO, it can buymore than the allocated number of shares from the issuer,for distribution among the syndicate members. This allowsthe syndicate to sell more stock than the number officiallystated in the IPO documents-in effect, creating a shortposition. Under NASD rules, the over-allotment cannotexceed 15% of the firm-commitment offering\"
www.bowne.com/newsletters/pdf/review/dec98_1.pdf

Alison Schwitzgebel
France
Local time: 15:51
Native speaker of: Native in EnglishEnglish, Native in GermanGerman
PRO pts in pair: 92

Peer comments on this answer (and responses from the answerer)
agree  airmailrpl: both answerers deserve the points
53 mins
agree  MikeGarcia
2 hrs
Login to enter a peer comment (or grade)



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