Description
Green Shoe Option: Price Stabilization Mechanism
GREEN SHOE A Price OPTION Stabilization
Mechanism
Introduction
?
“green shoe option” means an option of allotting equity shares in excess of the equity shares offered in the public issue as a post-listing price stabilizing mechanism The term comes from the first company, Green Shoe Manufacturing now called Stride Rite Corporation, to permit underwriters to use this practice in its offering.
?
?
“stabilising agent” means a merchant banker who is responsible for stabilising the price of equity shares under a green shoe option, in terms of these regulations
What is it ? – The SEBI Definition
?
It’s an option of allocating shares in excess of the included in the Public Issue & operating a post-listing issue price stabilizing mechanism in accordance with the provision of Chapter VIII-A of the SEBI DIP Guidelines which is granted to a Company to be exercised through a “Stablizing Agent”
Modus Operandi
?
Authorization seeking the possibility allotment of further shares to “Stabilizing Agent” at the end of Stabilization Period in the resolution of General Meeting authorizing the IPO.
of the the the
?
Appointment of a Stabilizing Agent from the IPO Management Team. This Agent is the party responsible for the “Price Stabilization Process”
Modus Operandi – Contd…
?
SA enters into an agreement with the Promoters or Pre-Issue Shareholders, who will “lend” there shares under provisions of the Chapter pertaining Green Shoe Option in the SEBI DIP Guidelines. (The Maximum no. of shares that may be borrowed should not exceed 15% of the total IPO size. The Lead Merchant Banker, in consultation with the SA, determine the no. of shares to be “Over Alloted”
?
Modus Operandi – Contd…
?
For the purpose of stabilisation of post-listing price of the specified securities, the stabilising agent shall determine the relevant aspects including the timing of buying such securities, quantity to be bought and the price at which such securities are to be bought from the market. The stabilisation process shall be available for a period not exceeding thirty days from the date on which trading permission is given by the recognised stock exchanges in respect of the specified securities allotted in the public issue.
?
Modus Operandi – Contd…
?
A Special A/c for GSO Proceeds with a Bank & Special A/c for GSO Shares of the Company with a Depositary is opened by the SA The Money received from the applicants against over allotment in the GSO shall be deposited in the Special A/c for GSO Proceeds distinct from the Issue A/c This money is to be used in the buying shares from the Market for Price Stabilization during the Stabilization Period
?
?
Modus Operandi – Contd…
?
Shares so bought from the Market lying in the GSO Demat A/c are to be returned to the Lenders, immediately. Prime Responsibility of the SA shall be to stabilize the Post-Listing price of the Shares. On expiry of the Stabilization Period, in case the SA doesn’t buy the shares to the extent of the Over-Allotment by the Company, the issuer shall allot shares to the extent of the shortfall to the GSO Demat A/c, within 5 days. These shares would be returned to the Promoters in lieu of the shares borrwed from them, with the GSO Demat A/c being closed after that.
?
?
Modus Operandi – Contd…
Any monies left in the special bank account after remittance of monies to the issuer under subregulation (8) and deduction of expenses incurred by the stabilising agent for the stabilisation process shall be transferred to the Investor Protection and Education Fund established by the Board and the special bank account shall be closed soon thereafter. ? The stabilising agent shall submit a report to the stock exchange on a daily basis during the stabilisation period and a final report to the Board in the format specified in Schedule XII.
?
Modus Operandi – Contd…
?
A Final Listing Application for these shares is made to all exchanges. Finally, The SA has to remit an amount equal to (Further Shares alloted by the Issuer Company to the GSO Demat A/c) X (Issue Price) to the Issuer Company from the GSO Bank A/c
?
Modus Operandi – Contd…
?
The stabilising agent shall maintain a register for a period of at least three years from the date of the end of the stabilisation period and such register shall contain the following particulars:
? (a) The names of the promoters or pre-issue shareholders from whom the specified securities were borrowed and the number of specified securities borrowed from each of them ? (b) The price, date and time in respect of each transaction effected in the course of the stabilisation process ? (c) The details of allotment made by the issuer on expiry of the stabilisation process.
THANK YOU
doc_992292254.pptx
Green Shoe Option: Price Stabilization Mechanism
GREEN SHOE A Price OPTION Stabilization
Mechanism
Introduction
?
“green shoe option” means an option of allotting equity shares in excess of the equity shares offered in the public issue as a post-listing price stabilizing mechanism The term comes from the first company, Green Shoe Manufacturing now called Stride Rite Corporation, to permit underwriters to use this practice in its offering.
?
?
“stabilising agent” means a merchant banker who is responsible for stabilising the price of equity shares under a green shoe option, in terms of these regulations
What is it ? – The SEBI Definition
?
It’s an option of allocating shares in excess of the included in the Public Issue & operating a post-listing issue price stabilizing mechanism in accordance with the provision of Chapter VIII-A of the SEBI DIP Guidelines which is granted to a Company to be exercised through a “Stablizing Agent”
Modus Operandi
?
Authorization seeking the possibility allotment of further shares to “Stabilizing Agent” at the end of Stabilization Period in the resolution of General Meeting authorizing the IPO.
of the the the
?
Appointment of a Stabilizing Agent from the IPO Management Team. This Agent is the party responsible for the “Price Stabilization Process”
Modus Operandi – Contd…
?
SA enters into an agreement with the Promoters or Pre-Issue Shareholders, who will “lend” there shares under provisions of the Chapter pertaining Green Shoe Option in the SEBI DIP Guidelines. (The Maximum no. of shares that may be borrowed should not exceed 15% of the total IPO size. The Lead Merchant Banker, in consultation with the SA, determine the no. of shares to be “Over Alloted”
?
Modus Operandi – Contd…
?
For the purpose of stabilisation of post-listing price of the specified securities, the stabilising agent shall determine the relevant aspects including the timing of buying such securities, quantity to be bought and the price at which such securities are to be bought from the market. The stabilisation process shall be available for a period not exceeding thirty days from the date on which trading permission is given by the recognised stock exchanges in respect of the specified securities allotted in the public issue.
?
Modus Operandi – Contd…
?
A Special A/c for GSO Proceeds with a Bank & Special A/c for GSO Shares of the Company with a Depositary is opened by the SA The Money received from the applicants against over allotment in the GSO shall be deposited in the Special A/c for GSO Proceeds distinct from the Issue A/c This money is to be used in the buying shares from the Market for Price Stabilization during the Stabilization Period
?
?
Modus Operandi – Contd…
?
Shares so bought from the Market lying in the GSO Demat A/c are to be returned to the Lenders, immediately. Prime Responsibility of the SA shall be to stabilize the Post-Listing price of the Shares. On expiry of the Stabilization Period, in case the SA doesn’t buy the shares to the extent of the Over-Allotment by the Company, the issuer shall allot shares to the extent of the shortfall to the GSO Demat A/c, within 5 days. These shares would be returned to the Promoters in lieu of the shares borrwed from them, with the GSO Demat A/c being closed after that.
?
?
Modus Operandi – Contd…
Any monies left in the special bank account after remittance of monies to the issuer under subregulation (8) and deduction of expenses incurred by the stabilising agent for the stabilisation process shall be transferred to the Investor Protection and Education Fund established by the Board and the special bank account shall be closed soon thereafter. ? The stabilising agent shall submit a report to the stock exchange on a daily basis during the stabilisation period and a final report to the Board in the format specified in Schedule XII.
?
Modus Operandi – Contd…
?
A Final Listing Application for these shares is made to all exchanges. Finally, The SA has to remit an amount equal to (Further Shares alloted by the Issuer Company to the GSO Demat A/c) X (Issue Price) to the Issuer Company from the GSO Bank A/c
?
Modus Operandi – Contd…
?
The stabilising agent shall maintain a register for a period of at least three years from the date of the end of the stabilisation period and such register shall contain the following particulars:
? (a) The names of the promoters or pre-issue shareholders from whom the specified securities were borrowed and the number of specified securities borrowed from each of them ? (b) The price, date and time in respect of each transaction effected in the course of the stabilisation process ? (c) The details of allotment made by the issuer on expiry of the stabilisation process.
THANK YOU
doc_992292254.pptx