BizTerm Definition
Flipping
Full Definition

These are market participants who try to get shares of stock at the IPO price and immediately sell the shares in the aftermarket. While many flippers are small players looking for a point or two of quick profit, large, well-known mutual funds also practice flipping. It is a controversial practice because the underwriters want to control the trading in the IPO immediately after it goes public and the company wants their shares placed with long-term investors. However, flipping also provides liquidity for additional purchases of stock. The underwriters try to discourage flipping by placing stock in the hands of long term investors, particularly ones that have promised aftermarket orders. Nevertheless, flippers who are identified by underwriters move on to flip again by setting up new firms. Brokerage firms try to curb flipping by individual investors by imposing waiting periods and fees on sellers and a penalty bid on the individual's broker. To the underwriters dismay, however, the largest institution investors and mutual funds continue to flip with impunity because of their great size and influence.


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