Green shoe

The Green Shoe denominates to a clause in the contracts of IPO layout (public invitation to bid), in which affords to the issue managers sell more stock of the intended ones (until an additional 10% approximately), in the cases that the lawsuit arrives to be a lot more of what was foreseen. This term originates from the Green Shoe Company, which used this clause 70 years ago.

This system was created for stabilize the price of the IPO in those cases that happens a strong demand and the value broke the rim. Then, the problem works out selling stock additional, obtaining goodwill without risks, for the issue manager.