Green Shoe Option

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PRESENTATION ON
GREEN SHOE OPTION

(TREND IN INDIA)

CONTENTS






Introduction
Terms Associated
Process of Green shoe Option
Analysis of Data
Summary and conclusion

INTRODUCTION
• It was initiated by US company Green Shoe
Manufacturing (now called Stride Rite Corporation)
• Green Shoe Option” It means an option of allocating
shares in excess of the shares included in the public
issue and operating a post-listing price stabilizing
mechanism in accordance with the provisions of
Chapter VIII-A of these Guidelines, which is granted
to a company to be exercised through a Stabilising
Agent.
• In India it was started from August 14 2003.

Example
• Consider a company planning an IPO of say,
100,000shares (the ‘Base Case IPO’), at a book-built
price of R100/-, resulting in an IPO size of
R100,00,000. As per the ICDR Regulations, the overallotment component under the Green Shoe mechanism could be up to15% of the Base Case IPO,
i.e. up to 15,000 shares i.e. Green Shoe shares.

TERMINOLOGIES UESD







Primary and Secondary Market
Initial public Offering
Listed Company
Over Allotment of Shares
Stabilizing Agent
GSO window period

PROCESS INVOLVED
• The issuer company should pass the shareholders
resolution for availing the GSO and appointing SA
• the SA will enter an agreement with promotors or
existing shareholders to borrow certain number of
shares.
• The extent of borrowed shares is restricted to 15% of
the issue size.
• The GSO window period will be 30 days and the
shares bought is kept in separate dematerialized
account.

Contd…
• The SA will buy the shares in case the share price fall
below the issue price during window period. It is
implied that the SA would sell the shares that were
bought previously, if the market price rises
significantly.
• At the end of 30 days the shares brought will be
handed to the concern parties.

DATA ANALYSIS
• Since August 14 2003 to December...
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