RE: Stabilisation notice19 Nov 2025 09:09
I will answer my own question thanks to Google…..
After a company has made the decision to go public and conduct an IPO, it will vet a number of underwriters for expertise in valuing the company's equity, helping with marketing and distribution, conducting sell-side research support, and coordinating trading functions.
Once the IPO price has been set by the underwriter, and the issuer's shares make their debut in the public, it is in the best interest of the issuer that the shares are well-received. This translates to a higher stock price upon release into the market.
The stabilization bid helps to make sure that the trading price does not fall below the IPO price, which is crucial for a company that doesn't want to risk a negative perception after going public.
To prepare for this risk, a company may grant the underwriters a greenshoe option—also known as an overallotment option—that allows the underwriters to oversell or short-sell up to 15% more shares than initially offered by the company.
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If the price wavers shortly after the stocks are issued and demand is weak, the underwriters will step in and make a stabilizing bid. This involves buying back the shorted shares. Creating this extra source of demand for the newly issued shares helps to stabilize the stock price, keeping it above, or at least around its issue price