Unformatted text preview: price in the prospectus is consistently lower than what the market is willing to bear. To capture this initial return, an investor must be fortune enough to receive an allocation of shares from the investment banker and to sell those shares at the first opportunity. Not all investors are allowed to participate in the investment bank’s allocations. Investment banking firms underwriting new issues generally discourage flipping, in large part because it can depress a stock's price in the secondary market (Flipping Penny Stock, 2010). For investors who buy IPO shares when they begin trading in the open market in the hope of making a quick profit, the rewards are much smaller, and the risks much greater, than those faced by investors who participate in the initial offering. Thus overall we can say that stock flipping is not a good idea to look for small profits rather investors should stay long in the company and enjoy dividends plus stock appreciation....
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- Spring '11
- Corporate Finance, retail investors