Green Shoe Option Essay

Name: Abhishek Kumar Pundir- 1420402, Siddarth S- 1420425, Akshya R K- 1420437
Group Number: X Topic: Green Shoe Option
3 Main Article:
i. "Green Shoe Options- An Indian Perspective"- Dr Ranjan Kumar Patra ii. "Stabilisation and allotment - A european supervisory approach"- FESCO iii. "The economics of IPO stabilization, syndicate and naked shorts" - Tim Jenkinson & Howard Jones
I) Historical significance:
Greenshoe was established by a company called "GreenShoe Manufacturing" which is now said to be as "Stride Rite Corporation". GreenShoe is nothing but an overallotment of shares. It is called Overallotment option because in adding up to the shares originally offered, few more shares would be set aside for underwriters. Objective of this is "stabilizing the new share issue price after the determination of offer price". Security Exchange commission has legally introduced this option to increase competitiveness

And its application in Indian perspective.
Methodology: Research was purely based on the data collected from SEBI annual reports- Secondary data
Findings: It aims at better price stabilization of share price. But in India GreenShoe option is still in infantry phase. Not many companies in India had gone for this mechanism for price stabilization, this is because of the unwillingness for company and uncertainty about GreenShoe option.
2) Stabilisation and allotment - A european supervisory approach- FESCO
Research Objective: Forum of European Securities Commission has made few changes in stabilization and allotment of shares. Research has been done those line to understand the effectiveness of the changes.
Findings:
i. Allotment principle: Investors in different tranches would be treated differently. And it is based on their involvement in the investor service