Safety Net arrangement

Please explain: What is Safety Net arrangement

A safety net arrangement is an arrangement provided by an issuer of shares, pursuant to which a person (“Safety Net Provider”) offers to purchase the shares from the original retail individual investors (“RIIs”) at their IPO issue price after the expiry of a particular period, in the event the price of such share has fallen below the IPO price. The basic intent of the safety net mechanism is to protect the investments of the RIIs in the IPOs from over pricing of such IPOs, and thereby encourage retail investment in the capital markets.

Answer given by Shubhamm Sir at 29-Nov-2022 02:06 AM