Stabilization is one of the few forms of price support that regulators explicitly allow, because it is disclosed in advance and capped at the offer price. The stabilizing manager posts a bid at or just under the offer and absorbs early sellers.
The practical consequence is that broken deals often sit pinned exactly at the offer price for days and then fall sharply when the syndicate stops. The bid is a floor with an expiry date, not a valuation.
Example: a deal priced at $19 trades to $19.02 and sits there on heavy volume for four sessions while the syndicate covers its 2.5M share greenshoe short. On day five the support ends and the stock opens at $17.40.
Related: greenshoe, underwriter, ipo, ipo-pop, offering-discount