Mobile Units recently offered 30,000 new shares of stock for sale. The underwriters sold a total of 32,000 shares to the public at a price of $14.50 a share. The additional 2,000 shares were purchased in accordance with which one of the following?

A. Red herring provision.

B. Quiet provision.

C. Lockup agreement.

D. Post-issue agreement.

E. Green shoe provision.

Question

Business

Tamia Wood

17 January, 08:08

Mobile Units recently offered 30,000 new shares of stock for sale. The underwriters sold a total of 32,000 shares to the public at a price of $14.50 a share. The additional 2,000 shares were purchased in accordance with which one of the following?

A. Red herring provision.

B. Quiet provision.

C. Lockup agreement.

D. Post-issue agreement.

E. Green shoe provision.

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Answers (1)

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Jairo Mejia · Answer 1

E. Green shoe provision

Explanation:

Green shoe provision also called Overallotment option is an underwriting agreement which gives the underwriter the rights to ability to sell investors more shares than the amount that was initially agreed upon only if security issue demand increases higher than expected. In this case, the additional 2000 shares is in accordance with the Green shoe provision as what was initially planned was 30000 which was later increased to 32000.