Staying Green

So I seem to learn more about how much I just don’t know every day. Despite following this US IPO closely I haven’t really understood the over-allotment provision or “Green Shoe” option until now [Investopedia explanation here].

The SEC allows for up to a 15% additional allotment to be purchased by the underwriters at the IPO price for a period of 30 days. So in this case an additional 2.2 million shares to the original 14.8 million for the IPO [details here]. From the underwriters point of view this can make a short position to that tune of that same percentage a bit of a no-brainer — with your downside in the event of a short squeeze capped at the $6 IPO price.

ASIC appears to allow this — in what might otherwise be considered a market manipulative — situation under some market stabilisation exemptions. However, daily disclosure of this activity appears to be required. You can see from the latest ASX announcement that TD Securities have already bought close to the 2.2 million mark [ASX announcement 8th Jan 2025].

So, ‘stabilising the market’ can also be you covering your short position on market at below the IPO price.

If that sounds like the financial equivalent to the merchant bankers racing in the trots, it’s because it is (in more ways than one).

However, we are nearly at the point where all that ends, and it is just time to make money the old fashioned way: where you start selling it for more than you got it for. Which is more in my wheelhouse. Lake Street Capital — the last of the four investment banks behind the IPO — has now commenced coverage and set their price target at $20 USD [article here].

It looks like this horse can then finally be unbridled and start bolting.