Robinhood put 35 percent of shares aside for retail investors: report

Robinhood is putting its money where its mouth is.

The commission-free trading app plans to set aside as much as 35 percent of shares in its highly anticipated initial public offering for retail investors, The Wall Street Journal reported Thursday, citing people familiar with the matter.

And the company reportedly wants people to sign up to buy the shares on its new platform, called IPO Access, that gives users access to IPOs before they start trading.

The online brokerage wouldn’t be the first company to reserve a significant portion of shares for amateur investors at the IPO, but it is an unusually high retail allocation.

The plan would give amateur investors, as opposed to institutional players, the opportunity to buy shares of Robinhood at its preset IPO price.

It would also give the online brokerage the chance to capitalize on growing interest from individual investors, who have demonstrated an outsized impact on the market in recent months, pushing the price of a number of stocks like GameStop and AMC to astronomical levels.

It could also help Robinhood fend off competition from other online brokerages such as SoFi and Public that are launching their own platforms to give amateur investors access to IPOs.

The launch of IPO-access platforms comes as the first half of 2021 has seen a boom in companies going public. Data from Dealogic shows that companies have already sold more than $190 billion in stock in US-listed IPOs this year, already higher than the record set in 2020.

This week, Robinhood let its users to buy up to 1 percent of IPO shares of Clear Secure, the maker of an identification platform. Language-learning app Duolingo also plans to reserve shares for Robinhood users when it goes public, the company said Tuesday in a filing.

And FIGS, a maker of medical attire, reserved about 1 percent of its IPO for Robinhood users.

“The alignment in terms of our customer base and who they are serving was there,” Trina Spear, FIGS Co-CEO, told the Journal.

Vlad Tenev is the co-CEO and co-founder of Robinhood.
Vlad Tenev is the co-CEO and co-founder of Robinhood.
Noam Galai/Getty Images for TechCrunch

However, investing in IPOs can be risky, as the companies have not been evaluated by the public markets before. There’s no guarantee that the IPO price accurately reflects how the market will value the company, and the stock could fall quickly.

A Robinhood spokeswoman declined to comment on the WSJ report.

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