DEFINITION of 'Spinning'

The act by a brokerage firm or underwriter of offering shares in an IPO to preferred customers, as a means of retaining or obtaining their business. In theory, spinning benefits both parties; the underwriter or brokerage firm cultivates loyalty and/or a broader client base, while the preferred customer enjoys the benefits, i.e. equity gains, afforded by a dynamic new public company. However, the practice is controversial, as many consider it unethical.

Spinning is also known as "IPO spinning."


Spinning is a lucrative means of enticing the business of large companies. By swaying the decision of the top executives, investment brokerage houses can secure a quid pro quo type of arrangement.

According to a 2009 study by professors Xiaoding Liu and Jay R. Ritter of the University of Florida, spinning does accomplish its goals. Liu and Ritter found that "spun" IPOs had first-day returns 23% greater than similar IPOs. In addition, the companies that were offered IPOs switched underwriters only 6% of the time, compared to 31% of the time for companies that were not offered IPOs. However, the study's authors also noted that "since 2001 the spinning of corporate executives has largely ceased in the U.S. This is due to both a regulatory crackdown and a dearth of hot IPOs to allocate."

  1. Impact Day

    The date on which a corporation makes a secondary offering of ...
  2. Laddering

    The promotion of inflated pre-IPO prices for the sake of obtaining ...
  3. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs ...
  4. Quid Pro Quo

    A Latin phrase meaning "something for something". This term is ...
  5. Principal-Agent Problem

    The principal-agent problem develops when a principal creates ...
  6. Bidding Ring

    A group of individuals or businesses that conspire to affect ...
Related Articles
  1. Retirement

    Pages From The Bad CEO Playbook

    Excess compensation, golden parachutes, tunneling and IPO spinning make these bad executives even worse.
  2. Retirement

    IPO Basics Tutorial

    What's an IPO, and how did everybody get so rich off them during the dotcom boom? We give you the scoop.
  3. Stock Analysis

    If You Had Invested Right After Coca-Cola's IPO

    Discover how one $40 share, with dividend reinvestment, over 90 years ago in the Coca-Cola Company would have made you a multimillionaire today.
  4. Stock Analysis

    If You Had Invested Right After Cisco's IPO

    Discover how Cisco became one of the greatest IPOs in history during the 1990s and how it continues to innovate and move forward today.
  5. Stock Analysis

    If You Had Invested Right After Amgen's IPO

    Discover how $1,000 invested in Amgen during its initial public offering (IPO), without reinvesting dividends, would be worth over $427,000 as of November 2015.
  6. Chart Advisor

    Now Could Be The Time To Buy IPOs

    There has been lots of hype around the IPO market lately. We'll take a look at whether now is the time to buy.
  7. Financial Advisors

    SEC Audit? How Financial Advisors Can Be Ready

    Your firm may never be audited by the SEC, but you need to be prepared nonetheless. Follow these tips to make sure you're in compliance and organized.
  8. Stock Analysis

    GoPro's Stock: Can it Fall Much Further? (GPRO)

    As a company that primarily sells discretionary products, GoPro and its potential falls right in line with consumer trends. Is that good or bad?
  9. Stock Analysis

    Match.com IPO: Is it a 'Buy' or Should You Pass?

    Demand for relationships is always high. Now you will have a way to directly invest in the relationship market. But is it priced fairly?
  10. Investing News

    What Affirmative Action Means for Businesses

    A look at what Affirmative Action means for your business.
  1. When did Facebook go public?

    Facebook, Inc. (NASDAQ: FB) went public with its initial public offering (IPO) on May 18, 2012. With a peak market capitalization ... Read Full Answer >>
  2. Can mutual funds invest in IPOs?

    Mutual funds can invest in initial public offerings (IPOS). However, most mutual funds have bylaws that prevent them from ... Read Full Answer >>
  3. What kind of assets can be traded on a secondary market?

    Virtually all types of financial assets and investing instruments are traded on secondary markets, including stocks, bonds, ... Read Full Answer >>
  4. Why would a company decide to utilize H-shares over A-shares in its IPO?

    A company would decide to utilize H shares over A shares in its initial public offering (IPO) if that company believes it ... Read Full Answer >>
  5. How do I place a buy limit order if I want to buy a stock during an initial public ...

    During an initial public offering, or IPO, a trader may place a buy limit order by choosing "Buy" and "Limit" in the order ... Read Full Answer >>
  6. How do corporate actions affect floating stock?

    Corporate actions, defined as a company's actions that affect the amount of outstanding company stock shares, can either ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Cyber Monday

    An expression used in online retailing to describe the Monday following U.S. Thanksgiving weekend. Cyber Monday is generally ...
  2. Bar Chart

    A style of chart used by some technical analysts, on which, as illustrated below, the top of the vertical line indicates ...
  3. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  4. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  5. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  6. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
Trading Center