The Green Shoe option is most apt to be exercised when an IPO is ________ and ________.

Question

Quizplus · Accepted Answer

The Green Shoe option, also known as the overallotment option, allows the underwriters of an IPO to issue an additional 15% of shares beyond the original offering size. This option is most likely to be exercised when the IPO is underpriced and oversubscribed because it allows the underwriters to meet the demand for the shares and potentially profit from the price increase caused by the high demand. Therefore, option B is the best choice.

The Green Shoe Option Is Most Apt to Be Exercised