Investment banks will go to extravagant lengths to land a public offering. Morgan Stanley was so keen to secure ride-hailing service Uber’s market listing that one banker reportedly worked as a driver. But stunts cannot make up for initial public offerings (IPOs) that go awry. Market stabilisation tactics are required. A greenshoe option (named for the first US company it was used for) enables banks to stabilise share prices in the first days of trading. Banks overallocate shares, meaning they are in effect short. If the share price rises, the bank can exercise the greenshoe and buy the extra stock at a discount, booking the profit. If the share price falls below the IPO price, the bank can buy shares back from the market to cover its short position. The purchase should support the share price. In Uber’s case, 27-million of these phantom shares were reserved for the greenshoe, but if any stabilisation plan has been put in place it has not prevented the stock from losing over a tenth...

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