A Case Study Of China Telecom’s IPO Green Shoe Mechanism

With the continuous advancement of the internationalization of China’s securities market,the price suppression rate has begun to decline year by year,and the phenomenon of stock price break-up is frequent.As an indispensable mechanism for IPOs in mature capital markets such as Europe and the United States,the green shoe mechanism plays a significant role in stabilizing the stock price of new shares,reducing the price suppression rate and optimizing the shareholding ratio of shareholders.With the implementation of the registration system and the relaxation of the application conditions of the green shoe mechanism on the science and technology innovation board,more and more companies in China have applied this mechanism in their IPOs to stabilize the stock price in the future.This paper takes China Telecom’s 2021 IPO adoption of the green shoe mechanism as the research object,and studies the application of the green shoe mechanism in the A-share market.Firstly,the relevant background and research significance are introduced,the research results of domestic and foreign scholars on IPO price suppression and overallotment options are sorted out and summarized,and the research methods,research content and relevant theoretical basis are clarified.Secondly,it focuses on the analysis of the implementation of China Telecom’s green shoe mechanism: by calculating the stock price volatility after China Telecom’s listing and comparing it with companies listed in the same period that did not exercise the green shoe mechanism,it is found that under the application of the green shoe mechanism,China Telecom’s stock price volatility in the first month is significantly low,and the successful completion of the IPO and the optimization of the company’s equity structure are ensured.However,when the green shoe mechanism plays a strong role in supporting the market,there are still some shortcomings,such as insufficient attention to small and medium-sized investors and incomplete role of underwriters.Finally,in view of these problems,it is proposed that the IPO pricing system should be further improved in the implementation of the IPO green shoe mechanism in China’s capital market,give full play to the role of underwriters,and require issuers to strictly abide by policy recommendations such as the information disclosure system.