Report: Robinhood Is Building A Platform To Democratize IPOs
Sarah Hansen, 25 March 2021
Robinhood is working on a platform that will allow its users to buy into initial public offerings, Reuters exclusively reported Thursday, citing people familiar with the process, marking another push by the popular investment app to democratize investment opportunities that are traditionally only available to big banks and Wall Street firms.
The allocation of IPO shares is a complex process—it doesn’t happen the same way for every listing and can depend on the type of industry and market conditions at the time. In general, the majority of available shares go to institutional investors. Some shares can also be reserved for retail investors, who are then able to buy them through their brokerage firms. More established and wealthier retail investors often have a better chance of receiving IPO shares than lay people, especially in popular listings.
Earlier this year, individual traders from online communities like Reddit’s r/WallStreetBets forum and users of popular online brokerage apps including Robinhood helped fuel the meteoric rise of a handful of previously unpopular stocks like GameStop, AMC Entertainment, and Blackberry. At the peak of the frenzy, Robinhood restricted trading on certain stocks and swiftly drew the ire of its users, who said they had missed out on gains because of the restrictions and filed multiple class-action lawsuits, and lawmakers, who said the app had engaged in illegal market manipulation.
