The Robinhood app.
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With its own IPO about to launch, Robinhood Markets is giving retail investors a chance to invest in some highflying initial public offerings.
Retail investors typically get shut out of highly anticipated IPOs like Airbnb (ticker: ABNB) or DoorDash (DASH). Instead, institutional investors or high-net-worth individuals are often allocated shares of these companies before they begin trading. Other investors don’t get a chance to invest until the companies start trading. By that time, the shares are often far more expensive. In December, shares of Airbnb rocketed nearly 113% to close at $144.71 in their debut, while DoorDash rose 86% in its first day, ending at $189.51.
Enter Robinhood, whose stated mission is to give everyone access to the financial markets. The firm is rolling out IPO Access, which aims to give retail investors the chance to buy shares of new issues before they begin trading on an exchange.
Robinhood won’t give its customers access to every IPO that comes to market. Right now, the trading site is offering a chance to buy shares of FIGS, a Santa Monica, Calif., firm that sells fashionable medical scrubs. FIGS set terms for its IPO on Thursday and is selling 22.5 million shares at $16 to $19. Goldman Sachs and Morgan Stanley are underwriters on the deal. FIGS is scheduled to price its deal on Wednesday, May 26, and trade the next day, a person familiar with the situation said.
About 1% of FIGS class A common stock will be offered to Robinhood’s retail investors, the prospectus said. Robinhood isn’t acting as an underwriter on the IPO, the filing said.
“Any purchase of our class A common stock in this offering through the Robinhood platform will be at the same initial public offering price, and at the same time, as any other purchases in this offering, including purchases by institutions and other large investors,” the FIGS prospectus said.
Only Robinhood customers who take part in IPO Access can request shares of the IPO. The firm will randomly allocate shares to those who request them, a person familiar with the situation said. Robinhood will notify customers before the IPO as to whether they succeeded in getting shares, the person said. The trading site won’t charge its customers a fee for buying IPO shares; instead, Robinhood will collect a fee from the underwriter.
Unlike other sites that give access to IPO shares, Robinhood doesn’t require retail investors to have an account minimum or to be a qualified investor. For example, TD Ameritrade has certain eligibility requirements that its customers must meet before they can trade IPOs. This includes having an account valued at least $250,000, or having completed 30 trades in the past three months, the TD Ameritrade site said.
“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,” the firm said in a blog post.
Robinhood is expected to make public the prospectus for its own IPO as soon as next week. Founded in 2013, Robinhood offers commission-free trading. An IPO could value the firm at $40 billion.
The firm came under scrutiny earlier this year for its handling of the frenzied trading in GameStop (ticker: GME) shares in January. At that time, Robinhood restricted buying of certain stocks, including GameStop, BlackBerry (BB), AMC Entertainment Holdings (AMC), and Bed Bath & Beyond (BBBY). Robinhood has said it was forced to curb trading because of escalating financial demands from its clearinghouse.
Write to Luisa Beltran at [email protected]
