Series 79 practice questionmediumGreen Shoe Option
Which of the following accurately describes a 'reverse green shoe' option?
- AAllows underwriters to purchase additional shares from the issuer above the offering amount
- BRequires underwriters to return unsold shares to the issuer
- CPermits the issuer to buy back shares from the open market
- DA put allowing the underwriter to sell aftermarket-purchased shares back to the issuer at the offering price✓ Correct answer
Explanation
Why D — A put allowing the underwriter to sell aftermarket-purchased shares back to the issuer at the offering price
With a reverse greenshoe, the underwriter may buy shares in the market when price is weak and put those shares to the issuer at the offering price.
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