Series 79 practice questioneasyGreen Shoe Option
What is the maximum overallotment option (green shoe) typically permitted in a public offering?
- A15% of the original offering size✓ Correct answer
- B10% of the original offering size
- C20% of the original offering size
- D25% of the original offering size
Explanation
Why A — 15% of the original offering size
The standard overallotment option (green shoe) allows the underwriters to purchase up to an additional 15% of the shares offered at the offering price. This option is named after the Green Shoe Manufacturing Company, the first issuer to include such a provision. The 15% limit is established by FINRA rules governing underwriting compensation, as the overallotment shares are considered part of the total distribution. The option is typically exercisable for 30 days following the offering.
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