XYZ Ltd. wants to make a public issue of 10,00,000 equity shares of ₹100 each at par. The applications are received for 15,00,000 shares. The company wants to explore the Green Shoe Option (GSO). IPO Price, i.e. listing

(i) Maximum number of shares which can be issued through the green shoe option = 10,00,000 x 15% = 1,50,000 equity shares (ii) If the market price post listing comes down to ₹90, the stabilizing agent will purchase shares from the market to boost up the demand for the shares. This will induce the investors to start purchasing the shares of XYZ Ltd. and consequently, the market price of shares will go up. So, basically, green shoe option is a price stabilizing mechanism. The shares borrowed from the promoters will then be returned to them. (iii) If the market price post listing goes up to ₹110, the stabilizing agent will do the same thing as discussed in point (ii) above. However, if the post listing market price goes above ₹120, the best course of action for the stabilizing agent is to wait for 30 days after the date of listing and then take steps to allot further shares. The shares borrowed from the promoters will then be returned to them.