What is the primary reason institutional investors might sell IPO shares quickly after purchasing?

Institutional investors often seek immediate financial gains, and one common strategy is to "flip" IPOs. This means they purchase shares at the initial offering price and sell them shortly after the stock begins trading on the secondary market. The rationale behind this practice is that many IPOs experience a surge in demand immediately following their market debut, leading to a rise in share prices. By selling quickly, institutional investors can capitalize on this price increase, realizing quick profits.

This approach is particularly attractive because IPOs can present significant short-term opportunities due to investor enthusiasm and market momentum. Holding onto these shares for the long term may not align with their investment strategy, which often prioritizes generating returns over extended periods.

In contrast, holding shares for long-term capital appreciation, diversifying portfolios, or acquiring stakes in the issuing company are strategies that might be more aligned with long-term investors or different types of investors rather than those who specialize in seizing short-term market opportunities.