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Greenshoe option

Also called: over-allotment option, greenshoe

In one line

A provision letting IPO underwriters sell extra shares if demand is strong, helping stabilise the new stock price.

In plain English

The greenshoe lets banks issue up to ~15% more shares in a hot IPO and gives them tools to support the price early on. It's mechanics of the offering, not something employees act on.

If you were explaining it to a 5-year-old

If everyone loves the toys on opening day, the sellers are allowed to bring out a few extra crates to meet the rush.

Why it matters when you sell

The greenshoe is background IPO plumbing; it can affect early post-IPO price behaviour around when your lock-up lifts.

Related terms

Initial public offering (IPO)RoadshowLock-up periodSecondary offering (public)

Put it to use

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Sources

Primary references for this term: US SEC / Investor.gov. Our definitions are written in plain English and kept evergreen — see the glossary methodology. General information, not advice.

Educational information only — not financial, tax or legal advice, and not an offer to buy or sell any security. Definitions are general; your own documents and local law govern your situation. PrivateTechShares is independent and not a broker or marketplace.