SC Introduces “Green Shoe” Option and Price Stabilisation Mechanism for IPOs

11 January 2008

The Securities Commission (SC) today introduced an over-allotment option and price stabilisation mechanism to enhance the efficiency and competitiveness of the fund raising process for IPOs in line with international best practices.
The introduction of this mechanism is enabled by the coming into force of the Capital Markets and Services (Price Stabilisation Mechanism) Regulations 2008 on 11 January 2008.

The “green shoe” mechanism allows the issuer to over-allot securities in excess of the number of shares constituting the original offer size to ensure that the demand for shares in an IPO can be met in an efficient manner and that price volatility during the period immediately after listing can be minimised. The mechanism can be used for any IPO where the total value of shares offered is not less than RM150 million. It can commence on the date of listing of the issuer and continue to be carried out during the first 30 days of trading from the IPO date.

Where the price stabilising mechanism is utilised, an announcement must be made to the exchange when the shares are listed and the stabilising manager must disclose its stabilising activities during and after the stabilising period.

Where the return of shares pursuant to the over-allotment option and/or the price stabilisation mechanism causes the triggering of an obligation to undertake a mandatory offer under the Malaysian Code on Take-Overs and Mergers 1998 (Code), the SC will grant an exemption from the obligation, subject to certain criteria being met.

A set of FAQs on the price stabilisation mechanism and the relevant regulations (pdf) are available at The SC website also provides a clarification note on the application of the Code under the price stabilisation mechanism.


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