Flipping and IPO share returns in a non-specialist market

Abstract

This paper examines IPO flipping activity in an order-driven market such as Australia. Based on a sample of 332 IPOs from January I991 to May 2000, we find that, as with the specialist market in the US, most of the IPO's first day flipping occurs during the first trading hour. Our results show that larger IPO firms and IPOs with a longer delay to listing and high growth potential are less likely to be flipped. IPOs with a higher level of pre-issue shareholder retained ownership and issued during the hot issue period, however, are more likely to be flipped. Consistent with US studies, we find that flipping is positively related to first-day IPO returns, suggesting that flippers are more prevalent in IPOs that provide higher short-run profits.