Robinhood giving retail traders access to IPOs at the offer price
Online brokerage maverick firm Robinhood has announced another new feature which it hopes will be attractive to potential new (and existing) retail clients – the opportunity to participate in new IPO offerings, like professional and institutional investors.
Robinhood said that as of today it is starting to roll out IPO Access, a new product that will give clients the opportunity to buy shares of companies at their IPO price, before trading on public exchanges begins. With IPO Access, clients can now participate in upcoming IPOs with no account minimums.
Most IPO shares typically go to institutions or wealthier investors – and more often than not they are priced by the investment bankers handling the transaction to pop in value after pricing. That of course means that those who get in at the IPO price – often the investment banks’ best clients – get a quick windfall, while the rest of us can only buy in at the higher post-IPO market price.
However with IPO Access, Robinhood claims that everyday investors will have the chance to get in at the IPO price.
Here’s how the company says it works.
1. Discover upcoming IPOs from a list of participating companies that plan to distribute shares to Robinhood. Clients can also follow those companies to stay up to date on milestones, and read their preliminary prospectus to learn about the business model, management team, and risk factors.
2. Request to buy shares of companies at their initial listing price range. When the final price is set, Robinhood clients will be able to review, edit, or cancel their request, before shares are allocated to Robinhood customers.
3. Watch and wait. IPO shares can be very limited, but the company said that all Robinhood customers get an equal shot at shares regardless of order size or account value.
The company noted that IPO Access is rolling out gradually to all customers over the coming weeks.
Robinhood itself is planning to go public in an IPO in the coming weeks, confirming at the end of March that it has made an initial filing with US regulators to begin the process.