Glossary

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Greenshoe

If in an initial public offering (IPO) the shares are in such great demand that not all interested investors can be satisfied, what is termed a greenshoe comes into play. In such an instance, and if the offering prospectus provides for such, the underwriter can exercise its “greenshoe option” to place more shares than originally contemplated and at the same conditions as the original IPO, thereby increasing the number of exchange-tradable shares by a predefined amount.
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