Green shoe option
This query is : Resolved
Vinay Kidangan
(Querist)
09 August 2011
How green shoe option works when the price go below offer price in ipo?
vijayakumar.sure
(Expert)
10 August 2011
The main job of the stabilizing agent begins only after trading in the share starts at the stock exchanges.
In case the shares are trading at a price lower than the offer price, the stabilizing agent starts buying the shares by using the money lying in the separate bank account. In this manner, by buying the shares when others are selling, the stabilizing agent tries to put the brakes on falling prices. The shares so bought from the market are handed over to the promoters from whom they were borrowed.In case the newly listed shares start trading at a price higher than the offer price, the stabilizing agent does not buy any shares.
In case the shares are trading at a price lower than the offer price, the stabilizing agent starts buying the shares by using the money lying in the separate bank account. In this manner, by buying the shares when others are selling, the stabilizing agent tries to put the brakes on falling prices. The shares so bought from the market are handed over to the promoters from whom they were borrowed.In case the newly listed shares start trading at a price higher than the offer price, the stabilizing agent does not buy any shares.
Vinay Kidangan
(Querist)
10 August 2011
In initial issue the price below the offer price agent wont buy.Also in Ipo the period of stabilising period is 30 days, the sa will introduce the reserve of 15% to stabilize, if the sa fail to stabilize in this 30 days will sa bear the loss? Will the merchant banker be ready suffer the loss. So green shoe option only a privilage for worthful companies right?
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