The Robinhood application on a smartphone.Bloomberg | Bloomberg | Getty Images
Robinhood is giving amateur investors access to initial public offering shares in its latest move to democratize retail investing.
IPO shares have historically been set aside for Wall Street’s institutional investors or high-net worth individuals. Retail traders typically don’t have a vehicle to buy into newly listed companies until those shares begin trading on an exchange, which is often after the share price has surged.
“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,” Robinhood said in a blog post Thursday.
Robinhood will not be an underwriter for companies hitting the public markets but will get an allocation of shares by partnering with investment banks.
This move is Robinhood’s latest to antagonize Wall Street. IPO stock pops on the first day averaged 36% in 2020, according to Dealogic, demonstrating individual investor thirst for some of these popular names that is not priced into IPO pricing. These are gains the little guy is missing out on.
The traditional IPO process has