Question

What is a Green Shoe Provision, a Secondary Offering and Rights in a Secondary Offering?

Answer 1

Green shoe Provision : This provision allows underwritter to buy upto addtional 15% of shares of company if the response to the issue exceeds their expectation. Generally they have right to exercise this option

Secondary Offering : It is issuance of new shares to public by a company that alraedy has made initial public offering. There are two types of secondary offering

1) Non dilutive secondary offering and 2) Dilutive secondary offering

Rights: Non dilutive secondary offerening does not dilute holding of existing shrare holders thus this provide them with required capital without giving up ownership of company