Talk:Greenshoe

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Clarification and detail[edit]

I am adding some clarification and detail on the mechanism of the over-allotment or "greenshoe" option of a public stock offering. Also, after reading the wiki-definition of a stub, it seems as though the additions I have made likely justify this topic to be removed from "stub status", so I am doing that as well. Duedilly 04:57, 29 September 2006 (UTC)

Secondary offering[edit]

I am going to add back in the term "secondary" offering that was edited out without an explanation, as that is also a very commonly used term in this field (from 20 years of professional experience in the equity new issue market) Duedilly 03:12, 11 December 2006 (UTC)

I have edited[edit]

Hi i have edited the last para, in which it was written "Therefore, if the company is able to buy back all of its oversold shares at the offering price in support ....", i think it should be "Therefore, if the underwriter is able to buy back all of its oversold shares at the offering price in support .... nitin8989 16:55,01 Febuary 2007 EST

Comparing German to English[edit]

hi there, do have some problems in comparing german to english wiki in regards to greenshoe. The german wiki states 1963, the english 1930 and the best information I found on the internet is : The name is derived from the first offering containing an overallotment option, underwritten by Paine, Webber, Jackson & Curtis for the Green Shoe Manufacturing Company in October 1960. Very few offerings are done without an overallotment option Source: http://www.yourdictionary.com/green-shoe --Concept1 (talk) 18:14, 7 January 2008 (UTC)

Green Shoe[edit]

Someone recently changed "greenshoe" to "Green Shoe," so I changed it back. Some Google search count comparisons, plus checks of other dictionaries and glossaries, not to mention Wikipedia's own "reverse greenshoe" article, made it clear that "greenshoe" is the most common spelling. The term originally came from a proper noun but it has entered common argot as a simple composite term. JimTheFrog (talk) 17:57, 18 December 2009 (UTC)

Inaccuracies[edit]

There are many innacuracies in this article.

1) The article stated that the greenshoe option "is the only SEC approved" means for stabilization. This is incorrect. I changed the article to reflect the fact that the SEC places few restrictions on the number of shares underwriters can sell-short in a distribution. Theoretically, underwriters can sell-short the entire offering. According to the SEC, it has become customary for underwriters to naked short sell 15% to 20% of the offering -- this is in addition to shares sold-short related to the Greenshoe. There are also two other SEC approved ways for underwriters to stabilize an issue, but I only touched on those (stabilizing bids, which is not used, and penalty bids).

2) The statement the greenshoe "gives the underwriters the right to sell additional shares ... IF DEMAND for the securities exceeds the original amount offered" is entirely incorrect. The whole purpose of the over-allotment is the opposite -- it gives the underwriters a tool to put upward pressue on the stock price if the price falls, implying weak demand. There is no requirement that the underwriter guage interest in deciding to sell the over-allotment. If they have the option, they will always do it because there is no risk to them and it is in both theirs and the company's best interest. "Exercising" the greenshoe does not mean selling the over-allotment. "Exercising" it means choosing to purchase the extra shares (usually 30 days out) from the company, at the offer price. Their other 'option' is to close the short position by purchasing in the after-market, generally under the offer price and at a profit, in which case that do not exercise the option. I have not corrected this, but will do so.

3) The fact that underwriters might be monkeying around with the stock in the after-market with the express intent of manipulaing the price presents obvious risk to investors, especially those who are unaware of these activities, so I inserted a brief paragraph about the risks.

4) The title of the article, "Greenshoe," is probably good in that it will come up in search engines. Given the subject matter, the article is incomplete without discussing the other methods that underwriters use to stabilize new issues. For this reason, I suggest changing it to something like, "Greenshoe and Underwriter Price Stabilization of IPOs and SPOs." Geoffsh1 (talk) 02:49, 14 December 2011 (UTC)

Syndicate bid[edit]

This document refers to 'syndicate bid' and defines it as synonymous with 'the offering price bid'. This doesn't seem to tie in with other definitions I have seen elsewhere, e.g. http://www.investopedia.com/terms/s/syndicatebid.asp which is in effect identical to http://www.investopedia.com/terms/p/pre-syndicatebid.asp. Is there a difference between the two bid types? — Preceding unsigned comment added by Lmeenan (talkcontribs) 10:14, 16 May 2012 (UTC)

I don't see where the article defines syndicate bid. I interpret the term "syndicate bid," as used in the article, to mean the price the syndicate is bidding for the stock. The meaning of the 'offer price' depends upon the context. In an IPO or SPO, the 'offer price' can mean the price at which the shares are offered to investors in the context of the IPO or SPO, or it can refer the to the bid, once the stock is trading on the open market. Geoffsh1 (talk) 00:40, 12 August 2012 (UTC)

External links modified[edit]

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Very poor quality - recommend full re-write, change of name to Stabilization (finance) and merger of reverse greenshoe article with this one[edit]

To be blunt, this article is very poor, and while some experienced marginal edits have been made, the core appears to have been written by someone/some people who are plainly neither practitioners nor knowledgeable. It also totally ignores non-US jurisdictions, as already pointed out. In addition, I believe that stabilization is the correct title for this article.

A couple of examples of why I assert this include the following:

  • the point of stabilization is stabilization, not an increase in deal size
  • the aim of the stabilization manager is to stabilize the price, not to buy back his overallotment (and so shrink the deal size - tricky to square with the previous point)

I would also merge the article 'reverse greenshoe' with this one, which already reprises much of the mechanism of the greenshoe (more clearly and accurately than in this article) but is otherwise by definition a perpetual stub.

This is not a request for others to do the work. If there is no meaningful push back on my comments over the next few days, I am happy to draft as per my above proposition.

37.126.252.109 (talk) 05:09, 18 April 2017 (UTC)

External links modified[edit]

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