What is the greenshoe mechanism, and how long can the greenshoe mechanism be protected?

Hello greenshoe, also known as "greenshoe."

option) or "over-allotment."

option), named after the American Greenshoe Company used it when it IPO in 1963. The greenshoe is a right granted to the underwriter by the issuer under the underwriting agreement, which is a flexible mechanism arrangement. The underwriters who obtain this right may over-offer no more than 15% of the number of the offering (hereinafter referred to as the "Green Shoe Scale") according to the same **, and the final over-allotment result will be determined after the end of the market stabilization period (generally 30 natural days from the date of listing) depending on market conditions.

Specifically, during the post-listing stability period, if the secondary market is higher than the issue price, the underwriter can exercise the green shoe and require the issuer to issue a corresponding amount of additional market, thereby increasing the supply of the secondary market; If the performance of the secondary market is weak, the underwriter will use the funds raised from the over-allotment to purchase the corresponding amount from the secondary market and reduce the number of shares circulating in the secondary market to support the stock price performance. In this way, when combined with an appropriate trading strategy, the exercise of the greenshoe mechanism can slow down the stock price** to a certain extent or keep the stock price at a level not lower than the issue price.

In the history of China's IPOs, only this year's ABC and 2006's ICBC IPOs have used this mechanism.

Taking the Agricultural Bank of China as an example, the Agricultural Bank of China plans to issue 22.2 billion shares this time, and according to the over-allotment ratio of no more than 15%, the Agricultural Bank of China can issue another 100 million shares to investors who apply for over-allotment through the green shoe mechanism, and can overraise 100 million yuan according to the issue price. This also means that based on the calculation of 100 million tradable shares on the first day of ABC's listing, the underwriter can undertake 3.3 billion shares selling, accounting for about one-third of the tradable shares on that day. Based on this calculation, as long as the turnover rate does not exceed 30%, even if there are only sellers in the market and no buyers, the lead underwriter of the Agricultural Bank of China can digest the ** thrown by the sellers to ensure that the Agricultural Bank does not break.

30 days.

Its main functions are: within 30 days from the date of listing, the underwriter can choose to issue 15% more shares (generally not more than 15%) than the predetermined size of the same issuance. The introduction of the greenshoe mechanism can play a role in stabilizing the stock price of new stocks.

Therefore, in the future, for new stocks that can use the green shoe mechanism, within 30 days from the date of listing, the phenomenon of rapid ** or ** will be suppressed, and the ** volatility at the beginning of its listing will converge.

Constructive suggestions on regulating the greenshoe mechanism.

In view of the drawbacks of the green shoe mechanism, it is necessary to standardize the first-class issuance system and maintain the effective order of the Chi He file market and the interests of all parties.

1. Reconstruct the equity structure of the listed short auction company, change the current phenomenon of "one share dominance", and establish a reasonable equity structure, so as to eliminate the disadvantages caused by the unreasonable structure and promote its internal governance mechanism to be sound and perfect.

2. Enhance the responsibility and risk awareness of the lead underwriter, and when underwriting, the lead underwriter should improve its ability to judge the comprehensive strength, future operation status and trend of the listed company, and strive to improve the improvement of its operation and management mechanism.

3. To enhance market transparency, issuers and lead underwriters should strictly abide by the obligation of information disclosure, report to the CSRC in a timely and accurate manner before and after the implementation of the green shoe mechanism, timely and accurately announce to the market code, and accept market supervision.

4. Market regulators should intensify supervision, severely crack down on black-box operations or even illegal operations by listed companies, lead underwriters, institutional investors and other related parties, put the interests of ordinary investors first, and rebuild and consolidate market credit.

The above content reference: Encyclopedia - Green Shoe Mechanic.

The "green shoe mechanism", also known as the green shoe option, refers to Article 48 of the "Measures for the Administration and Administration of Issuance and Underwriting" promulgated by the China Securities Regulatory Commission in 2006, which stipulates that "if the number of shares in the initial public offering is more than 400 million shares, the issuer and its lead underwriter may adopt the over-allotment option in the issuance plan". The "over-allotment option" is commonly known as the greenshoe mechanism.

This mechanism can stabilize the stock price trend after the listing of ** shares and prevent the stock price from fluctuating. This function is embodied in: if the issuer's **after listing** is lower than the issue price, the lead underwriter will use the funds obtained by the pre-over-offering** (the funds of the over-subscribed investors) from the secondary market at a rate not higher than the issue price, and then distribute them to the investors who submit oversubscription applications for the round limbs; If the issuer is higher than the issue price after listing, the lead underwriter will require the issuer to issue an additional 15 of the **, which will be distributed to the investors who have submitted an application for subscription and purchase in advance, and the additional funds for the issuance of new shares shall be owned by the issuer, and the additional part shall be included in the number of shares issued.

The green shoe mechanism is valid for one month, and after the time is exceeded, even if the stock price is lower than the issue price, it cannot be oversold, and naturally there will be no self-protection.

Green shoes. Generally refers to the "over-allotment option".

The over-allotment option is an option granted by the issuer to the lead underwriter to over-sell shares not exceeding 15% of the underwritten amount under the same issue**, i.e. the lead underwriter offers shares to investors for up to 115% of the underwritten amount. Within 30 days from the date of listing of the underwriting portion of the additional offering, the lead underwriter has the right to choose to purchase the issuer from the centralized auction trading market according to market conditions, or request the issuer to issue additional issuance** and distribute it to the investors who apply for subscription for the over-offering part. The lead underwriter can balance the supply and demand of the market by exercising the over-allotment option without using its own funds, and play a role in stabilizing the market price.

Extended information] The China Securities Regulatory Commission (CSRC) has launched a pilot program for over-allotment options in the ** issuance, and has supervised and managed the exercise of over-allotment options by lead underwriters in accordance with the law. **Exchange.

Real-time monitoring of the exercise of the over-allotment option option. The over-allotment option is an offering that complements other offerings. It can be used for both the issuance of new shares by listed companies and the initial public offering.

The over-allotment option (greenshoe option) is offered by the United States named Boston.

Green Shoe

manufacturing) was first used in its initial public offering** (IPO) in 1963 and is a colloquial name for the over-allotment option system, also known as the green shoe option.

At present, it has become a common practice to adopt the "over-allotment option" mechanism in overseas** issuances. Bank of Communications.

A number of domestic commercial banks, such as CCB, Bank of China and China Merchants Bank, have adopted the "over-allotment option" mechanism for overseas listings.

The over-allotment option or mechanism is mainly used in situations where market sentiment is unfavourable, the outcome of the issue is unoptimistic or unpredictable. The purpose is to prevent the share price from falling below the issue price or issue price after the issuance of new shares, and to enhance participation in the primary market.

The confidence of the subscribed investors realizes the share price of the new shares from the primary market to the secondary market.

Smooth transitions. The "over-allotment option" can be used to adjust the size of financing according to market conditions and balance supply and demand.

The "green shoe mechanism", also known as green shoe option or over-allotment option, refers to Article 48 of the Administrative Measures for the Issuance and Underwriting promulgated by the China Securities Regulatory Commission in 2006, which stipulates that "if the number of shares in the initial public offering is more than 400 million, the issuer and its lead underwriter may use it in the issuance plan to exceed the allotment option".

Among them, "overweight options" are commonly known as the greenshoe mechanism. This mechanism can stabilize the stock price trend after the listing of ** shares and prevent stock price fluctuations and **. ICBC adopted the "greenshoe mechanism" in its IPO in 2006.

In 1963, the American name Boston Greenshoe Manufacturing Company first used "greenshoe" in an IPO, which is the generic name for the over-allotment option system.

The greenshoe mechanism is mainly used in situations where the market sentiment is not good, and the issuance results are not optimistic or unavoidable. The purpose is to prevent the stock price from falling to or below the issue price after the issuance of new shares, enhance investors' confidence in participating in the primary market subscription, and achieve a smooth transition from the primary market to the secondary market. The use of "green shoes" can adjust the scale of financing according to market conditions and balance supply and demand.

The greenshoe regime is an option granted by the issuer to the lead underwriter to over-sell up to 15% of the underwritten amount to investors under the same offering**.

The greenshoe mechanism is mainly used in situations where the market sentiment is not good, and the outcome of the issuance is not optimistic or unpredictable.

The "greenshoe mechanism", also known as the greenshoe option (greenshoeoptionorover-allotmentoption), refers to Article 48 of the Administrative Measures for the Administration of Issuance and Underwriting promulgated by the China Securities Regulatory Commission in 2006, which stipulates that "if the number of shares in the initial public offering is more than 400 million, the issuer and its lead underwriter may adopt the over-allotment option in the issuance plan". Among them, the "over-allotment option" escort hall is commonly known as the green shoe mechanism.

This mechanism can stabilize the stock price trend after the listing of ** shares and prevent the stock price from fluctuating.

The "Green Shoe Mechanism" was named after the Greenshoe Manufacturing Co. of Boston, USA) was first used in an initial public offering (IPO) in 1963. Over the next 50 years, this mechanism was used frequently to reduce some of the underwriters' exposure to the first day of trading.

Today, the mechanism is an integral part of most IPOs. Although the original green shoe manufacturing company has become today's Striderite company in Lexington, Massachusetts, the "green shoe mechanism" has long been famous. Alibaba Group Luyin used this mechanism in its initial public offering in September 2014, making it the world's largest IPO ever.