What Is a Greenshoe Option?

The "Green Shoe Mechanism" is also called the Green Shoe Option or Over-Allotment Option. In the case of more than 400 million shares, the issuer and its lead underwriter may use the over-allotment option in the issuance plan. " The "over-allotment option" is commonly known as the green shoe mechanism. This mechanism can stabilize the stock price trend after the large-cap stocks are listed and prevent the stock price from fluctuating. ICBC used the "green shoe mechanism" for its IPO in 2006.

Green shoe mechanism

The "green shoe mechanism" is also called green shoes

"Green Shoe" was named after the United States named Boston Green Shoe Manufacturing Company when it was first used in IPO in 1963.

Green shoe mechanism is stable

As mentioned earlier, there are many conditions for the complete green shoe mechanism, and the final outcome is also different. I only give an example of the most common situation in the Chinese market: In China,

Almost every new share issue in the international market has green shoes. In practice, the amount of over-sale is determined by the issuer and

The positive effect of the green shoe mechanism on our market

The formation and application of the green shoe mechanism is the development of market-based distribution methods to a certain stage. It emerged in order to adapt to the rapidly changing market conditions.

Defects and disadvantages of implementing the green shoe mechanism in the current market

The green shoe mechanism is not perfect, and under the positive effects of China's stock market, it has a dual nature. There are defects and disadvantages in its operation.

First, induce

Constructive comments on regulating the green shoe mechanism

Regarding the shortcomings of the green shoe mechanism, we must standardize

Green Shoe Mechanism Agricultural Bank

Agricultural Bank's "green shoes" mechanism has been implemented

Agricultural Bank Green Shoes

A total of US $ 22.1 billion was raised, or approximately 150.3 billion yuan, making it the world's largest IPO ever.

Yangcheng Evening News today reported by reporter Chen Dao: Agricultural Bank (601288) announced today that the company s A shares have fully exercised the over-allotment option and issued 3.335 billion A shares in excess of the initial issuance of 22.235 billion A shares, accounting for 15% of the initial issue size of this offering. Statistics show that after the "Green Shoe" exercise was completed, the Agricultural Bank of China raised a total of 22.1 billion US dollars, or about 150.3 billion yuan, making it the world's largest IPO ever.

Green Shoes Mechanism Industrial and Commercial Bank

In 2006, the Industrial and Commercial Bank of China's initial public offering of shares, the first introduction of the green shoe mechanism to the A-share market and a great victory, made people look forward to the system to play a role in stabilizing stock prices. Subsequently, in the Agricultural Bank and Everbright Bank that went public in 2010, the green shoe mechanism once again played a role in maintaining stability.

Facebook Green Shoes Mechanism Facebook

On May 18, 2012, Facebook landed on Nasdaq, and Morgan Stanley, Facebook's lead underwriter, adopted the "green shoe mechanism", and Morgan Stanley received up to 15% over-allocation.

Chinanews.com, July 3rd. According to the issuance schedule, on July 7th (T + 1), after the online and offline purchase funds are verified, the Agricultural Bank of China and the joint lead underwriters will follow the online and offline subscription situation. Start the green shoe mechanism at the right time.

The green shoe mechanism, also known as the over-allotment option, was first designed by Wall Street bankers. It is mainly used in conditions of poor market sentiment, optimistic or unpredictable results, to stabilize stock prices and prevent new shares to a certain extent. After the issuance and listing, the shares will be broken to enhance the confidence of investors participating in the subscription of the primary market and realize a smooth transition of the share price of new shares from the primary market to the secondary market. The only IPO in the A-share market that has introduced the green shoe mechanism is ICBC.

After four years, the domestic capital market is expected to reproduce the green shoe mechanism due to the Agricultural Bank of China's IPO. According to the announcement of the Agricultural Bank of China, the initial issue size of the A shares of the Agricultural Bank of this plan is 22.2 billion shares, and the joint lead underwriter of the A shares is authorized to over-allocate shares of investors not exceeding 15% of the initial issue size at this issue price. After Agricultural Bank of China fully exercises the "green shoes", the issue size will be enlarged to 25.5 billion shares.

The over-allotment is faced with online purchase targets, which are carried out by postponing payment to strategic investors. If the Agricultural Bank is issued at the price range of 2.52-2.68 yuan / share as previously announced, and the green shoes are fully exercised, the amount of A-share financing is expected to reach 68 billion. Although in absolute terms, Agricultural Bank of China's "day volume" makes investors have to worry about the market's affordability. However, analysts point out that 40% of the total share capital of ABC s green shoes after the ABC s placement to strategic investors, that is, about 10 billion new ABC shares have been taken into the arms in advance by the war investment, and in accordance with Under the agreement, 50% of the strategic placement shares will be locked for 12 months, and the remaining 50% will be locked for 18 months. In the short term, it will hardly have any impact on ABC's stock price. The remaining portion after the strategic placement was only available for offline issuance, of which no more than 4.8 billion shares were issued offline, and the rest were issued online. ABC's seemingly large issuance scale has been split to take a closer look. The actual issuance volume on the market is much lower than market expectations.

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