First of all, why is it called the green shoe mechanism?
Green shoe mechanism and over-allotment option system, thinking that this mechanism was first adopted by a green shoe manufacturing company in Boston, USA, were named green shoe mechanism.
Second, the principle and function of green shoes mechanism
The participants in IPO generally include three aspects: issuers, lead underwriters and investors. The green shoe mechanism is an option belonging to the lead underwriter, that is, the lead underwriter can issue shares exceeding a predetermined size 15% (generally not exceeding 15%) at the same issue price within 30 days from the date of listing. Of course, you can also choose to give up the exercise, which depends on the trend of new shares after listing.
After the stock is listed, there are nothing more than two situations: rising or breaking. If the stock price rises, the underwriter can exercise the right to ask the listed company to issue 6.5438+0.5 million shares to investors, and the underwriter can earn more fees from it, and the listed company can also raise more funds. Issuing more shares can alleviate the shortage of supply and stabilize the stock price.
If it breaks after listing (the issue price is higher than the market price), then the underwriter will give up the exercise, but buy shares in the secondary market at a price lower than the IPO price, and then return them to the issuing company at the IPO price, thus earning the difference between the issue price and the market price. This artificial bill can play a role in raising the stock price.
The main function of the green shoe mechanism is to stabilize the price of new shares, prevent the stock price from rising or falling sharply after the issuance and listing of new shares, and give investors who participate in the primary market more confidence.
The above contents about the principle and function of green shoes mechanism hope to help everyone. Warm reminder, financial management is risky and investment needs to be cautious.