Green Shoe Option stabilisation mechanism enables over allotment and promoter share lending to support post listing price stability.

Green Shoe Option permits an issuer to use over-allotment and promoter share-borrowing to stabilize post-listing price. The issuer must authorize potential further allotment and appoint a stabilizing agent under a formal agreement. Borrowing from promoters or pre-issue shareholders may not exceed fifteen percent of the issue; all arrangements must be disclosed in prospectuses. Stabilization lasts no more than thirty days; the SA uses segregated GSO Bank and Demat Accounts to buy shares, must return market-purchased shares to promoters promptly, and where purchases fall short the issuer must allot additional dematerialized shares to the GSO Demat Account. The SA must report daily to exchanges, file a final report with the regulator, maintain a transaction register and retain records for three years.

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