Raman Ltd. issued 50 Lakh equity shares at a price of ₹ 200 per share. The company provided Green Shoe Option for stabilizing the post listing price of the shares. The issue was oversubscribed and it was decided that sta
CS Executive · Securities Laws and Capital Markets · PYQS · December 2020
Raman Ltd. issued 50 Lakh equity shares at a price of ₹ 200 per share. The company provided Green Shoe Option for stabilizing the post listing price of the shares. The issue was oversubscribed and it was decided that stabilizing agent would borrow maximum number of shares permitted by SEBI (ICDR) regulations. Due to rise in price during Green Shoe Option period, only 5 Lakh shares could be bought back at the price of ₹ 180. You are required to : (ii) Explain the responsibility of Issuer Company in the above case with respect to shortfall while exercising Green Shoe Option.
Answer & Explanation:
The issuer company would allot the differential 2.5 Lakhs shares into the Green Shoe Demat Account to cover up the shortfall, and the Stabilising Agent would discharge his obligation to the lending shareholder(s) by returning the 7.5 Lakhs shares that had been borrowed from them. The issuer company would need to apply to the exchanges for obtaining listing/ trading permissions for the incremental shares allotted by them, pursuant to the Green Shoe mechanism.
Topics: Public Issues
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