Robinhood to Give Retail Investors Direct Access to IPOs
In an effort to further— as Robinhood puts it— “democratize” retail investing, the stock trading app is expected to give amateur investors access to IPO shares as as early as next month.
Recall, back in March, Robinhood was in the midst of creating a new technology platform that would allow users to purchase IPO shares alongside Wall Street investors and wealthy individuals. Now, it appears that those plans have materialized, and retail investors can buy into newly listed companies before its shares begin trading on an exchange.
“We’re starting to roll out IPO Access, a new product that will give you the opportunity to buy shares of companies at their IPO price, before trading on public exchanges. With IPO Access, you can now participate in upcoming IPOs with no account minimums,” explained Robinhood in a blogpost published on Thursday.
Although Robinhood will not play the role as the underwriter for companies looking to hit the public markets, the trading app will receive a portion of those shares via partnerships with investment banks. Robinhood’s latest move will likely ruffle some feathers at Wall Street, which has traditionally reaped the benefits of IPO first-day gains. According to Dealogic, IPO stocks jumped by an average of 36% on the first day of trading in 2020, suggesting that demand for popular IPO listings is not only high among institutional investors, but also amateurs as well.
The traditional IPO process has faced increased scrutiny as of late. especially as investment banks typically allocate shares to their high net-worth clients who are then able to reap first-day benefits. However, with Robinhood’s new IPO Access, app users will be able to arrange to purchase shares at their initial listing price range, and once the official price is set, they will be able to finalize, change, or cancel their purchase.
Figs, a medical scrubs company, is expected to be the first company to offer its shares to Robinhood users, after filing its paperwork with the SEC on Thursday. “We currently anticipate that up to 1.0% of the shares of Class A common stock offered hereby will, at our request, be offered to retail investors through Robinhood Financial, LLC, as a selling group member, via its online brokerage platform,” Figs said, according to its S1 filing.
Although the IPO date isn’t finalized yet, it is typical for a company to make its public debut between one to two months following its S1 filing with the SEC. In the meantime, Robinhood’s IPO Access is expected to be made available to all of its users over the next several weeks.
Information for this briefing was found via Robinhood. 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.