Spinning is the act or practice of an investment bank offering under-priced shares of a company's initial public offerings to the senior executives of a third party

Party (law)

A party is a person or group of persons that compose a single entity which can be identified as one for the purposes of the law. Parties include: plaintiff , defendant , petitioner , respondent , cross-complainant A party is a person or group of persons that compose a single entity which can be...

company in exchange for future business with the investment bank. This conflict of interest

Conflict of interest

A conflict of interest occurs when an individual or organization is involved in multiple interests, one of which could possibly corrupt the motivation for an act in the other....

 was a relatively common way for investment banks to attract new clients in the past, but has since been prohibited. Those opposed to the practice liken IPO spinning to a disguised form of corporate bribery

Bribery

Bribery, a form of corruption, is an act implying money or gift giving that alters the behavior of the recipient. Bribery constitutes a crime and is defined by Black's Law Dictionary as the offering, giving, receiving, or soliciting of any item of value to influence the actions of an official or...

 and believe that it cheats two classes of investors:

• The shareholders in the third party company who are unable to receive similar favorable IPO terms as those received by its senior executives, and that constitutes a breach of fiduciary duty to shareholders required of the company's senior executives, specifically that they not use their corporate office to extract favors that are not shared equally by all shareholders.

• The retail
  Retail
  Retail consists of the sale of physical goods or merchandise from a fixed location, such as a department store, boutique or kiosk, or by mail, in small or individual lots for direct consumption by the purchaser. Retailing may include subordinated services, such as delivery. Purchasers may be...
  
   shareholder public who are compelled to purchase large sizes of stock in an IPO at exorbitant prices from the special favored executive friends of the brokerage underwriting
  Underwriting
  Underwriting refers to the process that a large financial service provider uses to assess the eligibility of a customer to receive their products . The name derives from the Lloyd's of London insurance market...
  
  the IPO.