Pricing – What happens at a closing? – (66)

underwriting syndicate. The company will issue a press release to announce the IPO price before the stock market opens the following day.
What is a ‘syndicated offering’?
In a syndicated offering, at the time of pricing, the managing underwriter(s) will invite additional underwriters to participate in the offering. Each member of the underwriting syndicate will agree to underwrite, that is, purchase, a portion of the shares to be sold and will enter into a separate addendum to the existing general agreement among underwriters that governs their relationship.
What is a “green shoe” or “over-allotment option”?
Most “firm commitment” equity public offerings include an “over-allotment option” or “green shoe” (the latter name references a case about these kinds of options). This option enables the underwriters to purchase additional shares (usually 15% of the “firm” shares purchased by the underwriters) from the company if there is substantial demand for the offered shares. The option is typically exercisable for 30 days after the pricing of the IPO and the underwriters may purchase the additional shares at the same price per share as those sold in the IPO.
What happens at a closing?
The closing of the offering usually takes place three or four business days (T+3 or T+4) after the pricing of the IPO, typically T+4 because offerings are usually priced after the close of the market at 4 p.m. Eastern time. Immediately prior to the closing, the underwriters will also hold a bring-down diligence call with the company to confirm that no material changes in the company’s business or finances have occurred since the date of

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