Greenshoe (Over-Allotment) Option

What this video covers

• Why the 15% greenshoe cap is calculated off the base offering size, never the total offering size, and how to work the 10-million-share base math on exam day
• The 30-day exercise window starting from the offering date, and what happens when day 31 passes with the option unexercised
• The exact strike mechanics: exercise price equals the offering price less the gross spread, identical to the original deal
• Why underwriters intentionally over-allocate short, creating a syndicate short position they must cover through either greenshoe exercise or open-market purchase
• The aftermarket price trigger: exercise the greenshoe when stock trades above the offering price, execute a syndicate covering transaction in the open market when stock trades below
• Why a partial exercise plus partial open-market cover is the rational middle path in a mixed aftermarket
• Why the greenshoe plus stabilizing bids constitute the entire legal stabilization toolkit, and how any other price-support method crosses into manipulation territory
• The distinction between prospectus disclosure (declaring a possibility) and legal commitment (underwriters are never forced to exercise or stabilize)