How will the underwriters' 45‑day option to purchase additional shares affect future dilution and share supply?

The underwriters’ 45‑day “greenshoe” option gives them the right to buy up to 187,500 additional ordinary shares at the IPO price of $8.00. That amount is ≈15 % of the 1,250,000 shares sold in the IPO and, if fully exercised, will increase the post‑offering float from roughly 1.25 M to ≈1.44 M shares. The immediate effect is a modest but measurable dilution of existing shareholders’ ownership stakes and a rise in the total share supply that can put downward pressure on the stock’s price, especially once the option is exercised and the new shares hit the market.

From a market‑dynamic perspective, the greenshoe is designed to give the company a “price‑stabilisation” tool: the underwriters can purchase the extra shares to cover any oversubscription or to support the price if demand wanes in the weeks after the IPO. If the underwriters exercise the full option, the incremental supply will be absorbed by the market over the 45‑day window, likely showing up as a modest increase in daily volume and a slight softening of the price trend. Conversely, if they choose not to exercise (or only a portion), the float remains at the original level and the upside potential is less constrained.

Trading implications

• Watch the prospectus filing and any “greenshoe‑exercise” notices in the next 4–6 weeks. Full exercise signals a near‑term increase in supply; partial or no exercise keeps the float tighter.
  
• Anticipate a 15 %‑level dilution ceiling—price models should incorporate this ceiling when projecting upside/downside. A modest price concession (e.g., 5‑8 % below the $8 IPO price) is typical when the extra shares are released.
  
• In the short term, maintain a flexible position size: if the option is exercised, consider scaling back or tightening stops to protect against the added supply; if it is not, the existing float may support a more bullish stance, especially if volume holds up and the stock remains above its breakout level on the daily chart.
  

Overall, the underwriters’ 45‑day option adds a conditional, pre‑planned source of dilution that can modestly expand the share base and affect price dynamics. Traders should monitor the exercise timeline, adjust dilution assumptions in valuation models, and be ready to react to any supply‑driven price movement once the option is exercised.