THE MARKETING OF CLOSED-END FUND IPOS - EVIDENCE FROM TRANSACTIONS DATA

We examine aftermarket transactions for closed-end fund IPOs and docum ent large sell-to-buy imbalances (''flipping''), extensive price stabi lization, and sharp subsequent price drops. The timing of the price dr op is related to both the amount of initial flipping, and use of the o ver-allotment options. The extent of the flipping activity is related to the composition of the syndicate. Moreover, aftermarket buys (sells ) are mainly small (large) trades. These findings suggest that lead un derwriters price stabilize and manage the supply of shares in the afte rmarket, and that closed-end fund IPOs are marketed to a poorly inform ed public. (C) 1996 Academic Press, Inc.