hard · Investment Banking
During an IPO, underwriters often have a 'Greenshoe' option.
What is the primary purpose of this option?
- To guarantee that the company receives a minimum amount of proceeds regardless of market conditions.
- To give the company's management the right to buy back shares at the IPO price.
- To prevent institutional investors from flipping the stock for a quick profit.
- To allow underwriters to stabilize the stock price by purchasing shares if the price falls or selling more if demand is high.
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