Series 79: 9.3.3.1. Naked Syndicate Short Positions

9.3.3.1. Naked Syndicate Short Positions

If authorized to do so by the AAU, the lead underwriter may decide to over-allot even if there is no greenshoe option, or to sell shares beyond the amount stated in the greenshoe option. The resulting syndicate short position is said to be “naked” (whereas one with a greenshoe option is said to be “covered”). If the lead underwriter creates a naked short position, it is typically 20% or less of the amount of the syndicate’s firm commitment. The naked short shares are delivered to investors, along with the firm commitment shares and any covered