A 10-million-share IPO includes a 15% green shoe. The underwriters overallot 11.5 million shares and the share price rises sharply post-offering. What action will the underwriters most likely take regarding the green shoe option?

1. AExercise the greenshoe at the offering price to cover the short✓ Correct answer
2. BBuy shares in the open market at the prevailing price to cover their short position.
3. CWait for the price to fall below the offering price before covering their short.
4. DLet the overallotment go uncovered, resulting in an uncovered short position.

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