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GK MCQs Section
Q. What does the greenshoe option allow underwriters to do during an IPO?
Answer: Sell up to 15% additional shares beyond the original offering
Notes: The greenshoe option is an IPO underwriting clause first used by Green Shoe Manufacturing Company. It allows underwriters to sell up to 15% extra shares above the original IPO amount to support share price stability and meet demand. The Securities and Exchange Commission permits this clause. The option helps underwriters stabilize prices by covering over-allotted shares in the aftermarket.
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