Define the following: Green shoe option.

CS Executive · Capital Markets & Securities Laws · PYQS · December 2016
Define the following: Green shoe option.

Answer & Explanation:

"Green Shoe Option" (GSO) 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 Regulation 45 of SEBI (ICDR) Regulations, 2009. The GSO process involves the appointment of a merchant banker as a stabilizing agent (SA) by the issuer company; agreement with promoters or other pre-issue shareholders to borrow a certain number of shares from them. The extent of borrowed shares is restricted to 15% of the issue size. The issuer company is required to pass a shareholder resolution for appointing a stabilizing agent and SA is required to open a GSO bank account and GSO demat account.

Topics: Public Issue

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