HydroPhi Technologies Group Inc. (fka HPTG)

[greenmachine2]

Green shoe Warrant provision what is it's purpose:

I will quote three answers that I found on a forum:

The underwriter short sells up to an extra 15% of the offering (a naked short sale exemption in the US).

When the price goes down, they cover in market, stabilizing the price without taking on any risk in their book by going long. This benefits the issuer by maintaining the price level and the underwriter because they're covering below sale px.

When the price goes up, they would get killed in the market by covering there, so they exercise their option to buy the 15% from the company at IPO price (the price they sold them at). The issuer raises more $, and the underwriter is protected from the downside of buying in market, plus more revenue for them.

It's mutually beneficial.

Your right with the first question its for price stabilisation. Your second question's answer is because most IPO's have a lock up period to stop the market being flooded with shares right after the IPO.As a company goes public, underwriters want to be able to see what outside investors believe the new entity is worth based on information like that found on the balance sheet, the income statement (profits and losses) and executive overviews of the business (business risks). If inside investors are allowed to sell immediately at the time of the IPO, it may well obscure the price that the markets put on the company by putting selling pressure on the shares on the first day of trading. Greenshoe options typically allow underwriters to sell up to 15% more shares than the original number set by the issuer, if demand conditions warrant such action. A Greenshoe allows the company and the underwriters to make more money.

They can't sell any shares for 4-6 months. It's better to have a stable stock than one that fluctuates wildly.

https://www.reddit.com/r/finance/comments/2wkl4l/would_someone_mind_giving_me_a_quick_explanation/