Brokers get fat commissions for selling shares in new issues, so they're usually reserved for the best, most industrious salespeople. IPO shares are saved to reward a firm's biggest, most active, and longest-standing customers. With an electronic brokerage that's participating in an IPO, the allocation process is more objective, althoughno less difficult. Of course, even investors able to get shares in an IPO will not be able to sell those shares right after the stock starts trading, a process called flipping that is often employed by institutional investors to boost returns. Try to flip, and you'll probably never get an allocation in an IPO again, at least not from the same broker.
Electronic brokers are particularly harsh against quick sellers.
Wit Capital, for instance, says it puts those who sell their IPO shares in the first 60 days at the bottom of the priority list in upcoming deals, while E-Trade also punishes flippers by restricting allocations in the future. When a stock first starts trading, its price will nearly always rise to an artificially high level. In addition, the lead underwriter is legally allowed to support the stock price of a newly public company, either by buying shares in the open market or by imposing harsh penalty bids on brokers who return shares in a new issue. Amazon's a bit of an unusual case, but most new issues will show some significant price weakness within the first six months of trading. The research report Another benefit of waiting a bit before investing in a new issue is the analyst research report, which comes out about 25 days after a stock starts trading.