The option of over-allotment means that the issuer gives the lead underwriter an option. According to the market subscription, the issuer may be required to issue a certain number of shares (usually not more than 65,438+05% of the initial number of shares issued) within 30 days after the listing of the shares, and distribute them to investors who apply for subscription for the over-allotment part.

Or buy stocks from the secondary market at a price not higher than the issue price, or both, that is, the lead underwriter sells stocks to investors at a price not exceeding 1 15% of the underwriting amount.

Under the implementation of the green shoe mechanism, underwriters can stabilize the share price of new shares by exercising over-allotment rights. If the share price falls below the issue price, the lead underwriter can use the funds raised from the over-allotment to buy shares from the secondary market and maintain the share price.

If the share price is higher than the issue price, the lead underwriter may require the issuer to issue new shares to investors who subscribe for over-allotment shares according to the issuance plan, thus increasing the number of shares. If the demand remains the same, the stock price will fall and be closer to the issue price.

Extended data

The introduction and implementation of green shoe mechanism in China is a gradual and perfect process, and its implementation began in the B-share market. Since 1993, the green shoe mechanism has been introduced into Hong Kong IPO market and has been well applied. Almost all listed new shares will be granted the option of over-allotment to the lead underwriter.

The implementation of green shoe mechanism in A-share market began in September of 200 1 year. The CSRC promulgated the Pilot Opinions on Over-allotment Option, which put forward the specific norms in the implementation process of the green shoe mechanism for the first time, and clarified the real-time monitoring right of the stock exchange. The issuer's plan for implementing the over-allotment option should be submitted to the shareholders' meeting for approval.

In addition to the application of large state-owned banks in IPO process, the application of green shoe mechanism in A-share market is rare. This is mainly because under the current IPO system, the pricing of new shares is certain, and the price of new shares is limited on the first day of listing, so the internal motivation to stabilize the stock price through the green shoe mechanism is insufficient.

Baidu Encyclopedia-Green Shoes Mechanism

People's Daily Online and Offline Issuance of Agricultural Bank of China Ending "Green Shoes" Mechanism to Protect Issue Price