Friendly Hands
What Are Friendly Hands?
"Friendly hands" is a term used to depict investors in a initial public offering (IPO) who will probably hold onto the security for quite a while.
Friendly hands are not keen on purchasing the new issue with the expectations of flipping the shares for a quick profit. Long-term investment in IPOs will in general reduce stock volatility, in this manner advancing stability that could then draw in different investors.
Grasping Friendly Hands
In the book-building phase for an IPO, the underwriter will cross the country (or world now and again) with members of company management on what is known as roadshows.
The intent is to market new shares to institutional investors who will place large blocks of shares in long-term portfolios. Companies that open up to the world don't maintain that their stock should be played with, and the underwriters and distribution group don't really want to participate in price stabilization after sending off the IPO into the market.
Subsequently, however much as could reasonably be expected, allotments of a limited number of accessible shares will be directed into friendly hands. Something contrary to friendly hands is a flipper, who is additional keen on profiting from a hot IPO issue by selling it very quickly in the wake of purchasing it from the underwriter or a member of the distributing syndicate.
Friends With Benefits
Institutional investors who exhibit predictable friendly behavior with IPO participation place themselves in great positions for future profoundly desired IPOs. By showing they are committed to claiming shares as long as possible, they will probably receive better allocations than flippers for a hot issue.
Truth be told, flippers might get focused out completely on an underwriter's book. As a company develops in the public markets, friendly hands might even be counseled by the company about corporate governance matters or key strategic issues.
Features
- However much as could be expected in an IPO, a limited amount of shares will be directed into friendly hands to balance out the stock price.
- Something contrary to friendly hands is a flipper, who is additional keen on profiting from a hot IPO issue by selling it very quickly in the wake of purchasing it.
- Investors who exhibit reliable friendly behavior position themselves well to get larger allocations for future exceptionally desired IPOs.
- Friendly hands are institutional investors who will hold the shares they buy in an IPO as long as possible.
- IPO underwriters look for friendly hands to reduce the possibilities they should step in and balance out the shares once sent off.
