Robinhood is engaged on a platform that may enable its customers to purchase into preliminary public choices, Reuters exclusively reported Thursday, citing individuals aware of the method, marking one other push by the favored funding app to democratize funding alternatives which can be historically solely accessible to large banks and Wall Road corporations.
Retail merchants and lay individuals typically wouldn’t have entry to IPO costs earlier than the primary day shares commerce on a public trade—that entry is often reserved for large establishments which can be allotted shares earlier than they’re formally listed.
Since most firms see costs leap when shares are first listed, these retail merchants may very well be lacking out on positive factors as a result of they didn’t have the chance to purchase the shares on the lower cost that large corporations paid.
The undertaking would additionally enable customers to purchase shares in Robinhood’s own upcoming IPO, Reuters reported, noting that entry to its personal itemizing might be simpler for Robinhood to manage as a result of it’s going to make the selections about allocate its shares.
Negotiations for entry to different firms’ IPOs could be harder as a result of the method is so carefully guarded by firms wanting to guard their income and so rigorously watched by regulators, Reuters reported, citing sources aware of the method.
The allocation of IPO shares is a posh course of—it doesn’t occur the identical manner for each itemizing and may rely upon the kind of business and market situations on the time. Basically, the vast majority of accessible shares go to institutional buyers. Some shares can be reserved for retail buyers, who’re then capable of purchase them by way of their brokerage corporations. Extra established and wealthier retail buyers typically have a better chance of receiving IPO shares than lay individuals, particularly in in style listings.
Earlier this 12 months, particular person merchants from on-line communities like Reddit’s r/WallStreetBets discussion board and customers of in style on-line brokerage apps together with Robinhood helped gasoline the meteoric rise of a handful of beforehand unpopular shares like GameStop, AMC Leisure, and Blackberry. On the peak of the frenzy, Robinhood restricted buying and selling on sure shares and swiftly drew the ire of its customers, who mentioned that they had missed out on positive factors due to the restrictions and filed a number of class-action lawsuits, and lawmakers, who mentioned the app had engaged in unlawful market manipulation.
What We Don’t Know
Robinhood filed the confidential paperwork for its providing earlier this week, however the timing and pricing remains to be unclear.