Robinhood Gives Retail Investors Access to IPOs, Ahead of Public Debut

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Platform trading app Robinhood, which is about to go public, announced it would allow retail investors access to IPO shares, in a move to “democratize IPOs for all,” in line with its mission to “democratize finance for all.”

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“Most IPO shares typically go to institutions or wealthier investors. With IPO Access, everyday investors at Robinhood will have the chance to get in at the IPO price,” the company said in a blog post.

The new platform will enable retail investors the opportunity to buy shares of companies at their IPO price, before trading on public exchanges and participate in upcoming IPOs with no account minimums, according to the post.

IPOs are typically broken into two tranches of demand: institutional and retail, according to Fidelity. The new platform could be rather revolutionary, as institutional investors typically receive the lion’s share of any IPO allocation: historically, the institutional to retail split is 90/10, Fidelity explains on its website.

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The platform’s process is fairly simple. First, you follow upcoming IPOs, read their preliminary prospectus to learn about the business model, management team and risk factors. Then, you can request to buy shares of companies at their initial listing price range.

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“When the final price is set, you’ll be able to review, edit, or cancel your request, before shares are allocated to Robinhood customers. Watch and wait — IPO shares can be very limited, but all Robinhood customers get an equal shot at shares regardless of order size or account value,” according to the post.

Robinhood filed for its own IPO in March, which is expected to take place after the SEC completes its review process, subject to market and other conditions, an earlier blog post said. The Wall Street Journal estimated at the time that its SEC filing “puts the company on track to start trading publicly by the end of the second quarter.”

Reuters reports that Robinhood will set aside some of its own shares, expected to be floated in a blockbuster debut, for sale on the platform.

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About the Author

Yaël Bizouati-Kennedy is a full-time financial journalist and has written for several publications, including Dow Jones, The Financial Times Group, Bloomberg and Business Insider. She also worked as a vice president/senior content writer for major NYC-based financial companies, including New York Life and MSCI. Yaël is now freelancing and most recently, she co-authored  the book “Blockchain for Medical Research: Accelerating Trust in Healthcare,” with Dr. Sean Manion. (CRC Press, April 2020) She holds two master’s degrees, including one in Journalism from New York University and one in Russian Studies from Université Toulouse-Jean Jaurès, France.
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