Green Shoe

Refers to the underwriter’s over-allotment option, named in honor of Green Shoe Company – the first issuer to have this provision. The over-allotment option, typically for up to 30 days, allows the underwriters to purchase up to 15% more shares than the original number sold by the issuer in the offering. The purchase price per share in the over-allotment option is the same price as in the offering. The underwriters may “over-allot,” or sell more shares, and this allows the underwriters to stabilize the price of the stock.