Robinhood Markets Inc. wants its users to buy stocks. That is, your own online brokerage company.
The popular stock trading app plans to set aside up to 35% of its shares in its upcoming IPO for retail investors, the company said in a regulatory filing on Thursday, a much larger allotment in retail than a typical deal. Robinhood wants people to sign up to buy the shares on its new platform, which will give users access to initial public offerings before they start trading.
The Robinhood IPO is emerging as the biggest test yet for a notion gaining traction on Wall Street: the everyday investor should play a bigger role in the IPO market. Robinhood competitors SoFi Technologies Inc. and the investment and social networking app Public Holdings Inc. are launching their own IPO access platforms to harness the newfound strength and enthusiasm of everyday investors.
The timing is not a coincidence. The new listing market is on track for the busiest summer in years. According to data provider Dealogic, companies have sold more than $ 190 billion in shares in US-listed IPOs in 2021, surpassing the record amount of 2020.
The new platforms are a reinterpretation of an old idea that was never really successful. Despite the influence that amateur investors have gained over meme stocks like GameStop Corp. and AMC Entertainment Holdings Inc. have been largely excluded from the IPO party. According to brokers, companies tend to give well below 10% to retail investors, and much of that supply is devoured by wealthy, well-connected customers of the banks. (There are a few notable exceptions: Facebook Inc. sold around 25% of its IPO shares to individual investors when it went public in 2012.)