With Robinhood’s IPO slated for today, the retail trading app has once again decided to disrupt traditional financial market practices: this time, by allowing its users to purchase a significant portion of the shares being offered in its IPO. And, to spice things up even more, the discount brokerage is also in the midst of developing a new feature that allows retail traders to invest their “spare change” in stocks.
Ordinary investors will now have access to nearly one-third of Robinhood’s shares being offered in its IPO; however, there are a number of risks associated with expanding the offering horizons beyond Wall Street. Firstly, retail investors have a higher likelihood of selling their shares quickly to earn a profit, and conversely dump their holdings if the stock shows signs of declining. Institutional investors, on the other hand, are more likely to do adequate due diligence, and go long on the stock.
In an effort to discourage traders from immediately dumping their shares at the IPO, Robinhood is planning to bar anyone from purchasing shares for 60 days if they sell their shares within 30 days after the IPO.
Lastly, the online trading platform, which allowed millions of Americans to allocate their stimulus checks to stock trading, has also devised a new method of scraping any remaining change from users’ pockets— literally. As Bloomberg reports, Robinhood has included a message in its app upgrade for the iPhone, which says the discount brokerage is working on a new option, dubbed “round up investments,” that will allow retail traders to invest any “spare change” they may have lurking around on stocks.
Information for this briefing was found via Robinhood and Bloomberg. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.