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March 26, 2021 01:00 pm

Robinhood Aims To Allow Users To Buy Into IPOs

An anonymous reader quotes a report from Reuters: Robinhood is building a platform to "democratize" initial public offerings (IPOs), including its own, that would allow users of its trading app to snap up shares alongside Wall Street funds, according to people familiar with the matter. The move could further erode Wall Street's grip on stock market flotations. It would be easier to implement for Robinhood's own IPO, given how companies and their investment bankers tightly control allocations to investors in new listings. Currently, Robinhood users and other amateur traders cannot buy into stock of a newly listed company until its shares start trading. Since shares often trade higher when they debut, big funds that get allocations in the IPO have an advantage. The average first-day trading pop on U.S. listings of businesses in 2020 was 36%, according to data provider Dealogic. Robinhood plans to carve out a chunk of its shares on offer in its IPO for its 13 million users, and to use technology it is building to administer this part of the offering, the sources said. [...] It would need to negotiate agreements with companies and their brokerages and get the blessing of U.S. regulators, the sources said. Robinhood could have leverage in these negotiations by arguing it would be acting as a bridge between the IPO and a major pool of investor demand, the sources added. It was not clear what kind of arrangements Robinhood would seek to put in place, and no certainty its ambition will come to fruition.

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