Reuters, citing unnamed sources, reported yesterday that “Robinhood Markets Inc is building a platform to ‘democratize’ initial public offerings (IPOs), including its own.”
Robinhood has seen record growth in the past few months, but has been the target of much criticism after suspending trading on certain stocks in January.
Allowing users to purchase shares IPOs could help it reestablish its brand as working toward its stated mission, “to democratize finance for all.”
In a blog post Tuesday, Robinhood announced it had begun the process of becoming a publicly-traded company. And according to Reuters, “Robinhood plans to carve out a chunk of its shares on offer in its IPO for its 13 million users.”
Allowing users to buy shares of an IPO isn’t completely unprecedented. In December 2020, Airbnb, Inc. (NASDAQ: ABNB) had an IPO price of $68 per share and allowed some of its hosts to purchase shares at that price.
The stock opened for trading at $146 per share, allowing hosts who took advantage of the offer to turn an immediate 115% profit. CNBC reported that one Airbnb host purchased 200 shares through the allocation and turned $13,600 into $28,942 in one day.
Companies have a lot of control over their own IPOs, but exactly how Robinhood plans to offer its users the opportunity to buy direct from other company’s IPOs remains unclear. According to Reuter’s unnamed source, “it would need to negotiate agreements with companies and their brokerages and get the blessing of U.S. regulators.”
At writing, Robinhood Markets Inc has not commented publicly on the Reuters report or offered any additional information other than what was shared in Tuesday’s blog post.
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