Robinhood to Enable Customers to Purchase into IPOs, Forward of its personal Market Debut
“Most IPO shares sometimes go to establishments or wealthier buyers. With IPO Entry, on a regular basis buyers at Robinhood may have the prospect to get in on the IPO worth,” Robinhood mentioned in a weblog publish.
Robinhood will work with Wall Avenue funding banks to get allocations for retail buyers, it mentioned.
Robinhood mentioned the brand new platform shall be obtainable to all prospects, with none account restrict restrictions. It plans to checklist various upcoming IPOs for purchasers.
Whereas Robinhood didn’t establish particular choices which might be obtainable, FIGS Inc on Thursday turned the primary firm to supply shares to retail buyers this manner. The maker of medical scrubs, face masks and shields is reserving 1% of its IPO providing of twenty-two.5 million shares for Robinhood customers.
A number of huge names, reminiscent of grocery supply app Instacart, Brazilian digital financial institution Nubank and electrical automobile maker Rivian, are anticipated to go public later this yr.
TAKING ON WALL STREET
Massive institutional buyers and funds have historically been the primary in line for allocations on IPOs, because the funding banks that management share allocations discover it simpler to rearrange it when solely a handful of recipients are concerned and since they should preserve these deep-pocketed shoppers blissful to win different enterprise.
That leaves most newbie merchants with no possibility however to purchase into inventory of a newly listed firm solely after its shares begin buying and selling – which frequently means paying the next worth. The common first-day buying and selling pop on U.S. listings of companies in 2020 was 36%, in keeping with information supplier Dealogic.
Robinhood will step by step roll out IPO Entry to all customers within the coming weeks.
On-line lending startup Social Finance (SoFi) additionally mentioned in March that it will permit retail buyers to purchase into IPOs.
Robinhood’s transfer, if adopted extra broadly in inventory market listings, could be one other disruptive step ahead for Silicon Valley tech corporations which have been trying to erode the iron grip of Wall Avenue’s largest establishments on market flotations.
The brand new providing comes months after a Reddit-fuelled retail buying and selling frenzy propped up a number of so-called “meme shares,” most notably fledgling online game retailer GameStop Inc.
On the time, Robinhood confronted widespread criticism over its resolution to put restrictions on buying and selling of the heavily-shorted shares. Robinhood later mentioned its clearinghouse compelled it to put the curbs as a result of it lacked enough capital to settle the trades.
(Reporting by Noor Zainab Hussain and Anirban Sen in Bengaluru and David French in New York; Enhancing by Saumyadeb Chakrabarty and Rosalba O’Brien)