Question

In the event the lead bookrunner of a follow-on offering seeks to exercise an over-allotment option, at what point is the distribution deemed completed?

A) When the over-allotment option is granted.
B) When the over-allotment option is exercised.
C) When the offering price is set.
D) When the shares are initially offered to the public.

Answer 1

The distribution is deemed completed when the lead bookrunner exercises the over-allotment option in a follow-on offering.

Step-by-step explanation:

In the context of a follow-on public offering, the lead bookrunner may be granted an over-allotment option, often referred to as a greenshoe option. This option allows the underwriters to sell more shares than were originally planned by the issuer if there's additional demand. The point at which a distribution is deemed completed is not when the over-allotment option is granted (B), nor when the offering price is set (C), nor when the shares are initially offered to the public (D). Instead, it is B) When the over-allotment option is exercised. This is because the exercise of this option indicates that additional shares have been distributed, satisfying additional demand, and finalizing the total number of shares sold in the offering.