From The IPO Decision by Jason Draho:
“Short covering: The underwriter can take an initial short position in the stock by overselling the IPO. Short covering in the open market creates additional demand that supports the price when there is selling pressure. The short position can alternatively be covered by exercising the overallotment option (OAO). An OAO is a standard feature of IPOs and it grants the underwriter the option to purchase additional shares from the issuer and resell them to investors at the offer price. The typical OAO is for 15 percent of the offer size and is exercisable for up to 30 calendar days after the offer date. The underwriter can completely hedge the upside risk if the short position does not exceed the size of the OAO, yet still maintain buying power to support the price when there is a sell imbalance.
Share repurchases by the underwriter in the open market are referred to as syndicate covering transactions and are subject to the same Regulation M disclosure requirements as penalty bids. In practice, investors are not informed that a particular trade is a short-covering transaction. The underwriter only has to include a statement in the prospectus indicating that it may engage in stabilizing transactions in conjunction with the offering of securities.”
And the same is true for every following offering of securities, although “Stabilizing is prohibited in an at-the-market offering.“