SoFi, Robinhood plan early IPO access for retail

SoFi, Robinhood plan early IPO access for retail
Social Finance said it will give investors with more than $3,000 in their accounts the ability to invest in initial public offerings.
MAR 26, 2021
By  Bloomberg

It used to be the ultimate Wall Street insider deal: Buy into the latest hot company before its shares start trading. Now at least two retail brokerages are looking at giving their customers early access to initial public offerings and the opportunity to buy shares at the same time as professional asset managers.

On Friday, Social Finance Inc., the online lender that plans to go public, said it would give clients with more than $3,000 in their accounts the ability to invest in IPOs. Robinhood Markets is building technology that would let its users do the same, Reuters reported Thursday.

The changes would mean potentially millions more dollars competing for stakes of companies about to go public, a boon for U.S. Inc., as well as the bankers behind the deals. It could also add to what some fear is an already frothy market, with valuations being driven by retail sentiment rather than fundamentals.

Neither SoFi nor Robinhood detailed what regulators have said about their plans. Investing early in an IPO can mean outsized gains, but it carries more risk. Still, the companies have pitched themselves as bringing the capital markets to the masses.

“Fintech largely has a populist, disruptive mission and so this is right in their DNA,” said Eric Balchunas, an analyst at Bloomberg Intelligence. “As opposed to letting ‘the man’ run it, they want to reward their customers and the little guy.”

Balchunas added that risks of pre-IPO investing should be clearly disclosed to retail investors, should such arrangements materialize.

SoFi, which gained popularity by refinancing student loans, plans to go public by merging with a blank-check company in a transaction that values the firm at about $8.7 billion.

Its early years helped the firm attract a customer base of young, highly paid white-collar professionals, whom SoFi refers to as “members.”

“Gaining access to primary offerings is another way to diversify your portfolio that has previously been restricted to a select few,” SoFi Chief Executive Anthony Noto said in a statement.

Pandemic accelerated investing based on ESG and climate goals

Latest News

Beyond the dashboard: Making wealth tech human
Beyond the dashboard: Making wealth tech human

How intelliflo aims to solve advisors' top tech headaches—without sacrificing the personal touch clients crave

Florida non-compete bill backed by Citadel bodes ill for advisor mobility
Florida non-compete bill backed by Citadel bodes ill for advisor mobility

As other states curb non-competes, the East Coast growth hub could soon become the most employer-friendly jurisdiction in the US.

Private placement executives from GPB Capital, guilty of fraud, get seven and six years in prison
Private placement executives from GPB Capital, guilty of fraud, get seven and six years in prison

Last summer, the two, David Gentile and Jeff Schneider, were found guilty of fraud in federal court in Brooklyn and received their sentencing today.

Advisory firm moms share high satisfaction but report early parenthood hurdles
Advisory firm moms share high satisfaction but report early parenthood hurdles

Early parenthood linked to lower fulfillment and fewer leadership roles, despite otherwise strong industry-wide support.

Creative Planning CIO warns of short-term private equity flips
Creative Planning CIO warns of short-term private equity flips

“It's the Golden Age, we're all blessed that this is where we are, what we do for a living, and that the sun is shining on the transition towards the RIA space," Creative Planning CIO Jamie Battmer said at a forum hosted by Goldman Sachs.

SPONSORED Beyond the dashboard: Making wealth tech human

How intelliflo aims to solve advisors' top tech headaches—without sacrificing the personal touch clients crave

SPONSORED The evolution of private credit

From direct lending to asset-based finance to commercial real estate debt.