greenshoe option

Definition

A provision in IPO underwriting allowing underwriters to sell additional shares if demand exceeds expectations, typically up to 15% more. Named after the first company to use it, because finance people hate straightforward names.

Example Usage

The underwriters exercised the greenshoe option, which means our IPO was oversubscribed—finally some good news!

Origin

Named after Green Shoe Manufacturing Company (now Stride Rite), first company to use this structure in 1963

Fun Fact

Despite the whimsical name, greenshoe options are deadly serious—they stabilize stock prices and prevent first-day crashes.

Source: IPO and public markets terminology

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