Robinhood Aims To Allow Users To Buy Into IPOs (reuters.com) 25
An anonymous reader quotes a report from Reuters: Robinhood is building a platform to "democratize" initial public offerings (IPOs), including its own, that would allow users of its trading app to snap up shares alongside Wall Street funds, according to people familiar with the matter. The move could further erode Wall Street's grip on stock market flotations. It would be easier to implement for Robinhood's own IPO, given how companies and their investment bankers tightly control allocations to investors in new listings.
Currently, Robinhood users and other amateur traders cannot buy into stock of a newly listed company until its shares start trading. Since shares often trade higher when they debut, big funds that get allocations in the IPO have an advantage. The average first-day trading pop on U.S. listings of businesses in 2020 was 36%, according to data provider Dealogic. Robinhood plans to carve out a chunk of its shares on offer in its IPO for its 13 million users, and to use technology it is building to administer this part of the offering, the sources said. [...] It would need to negotiate agreements with companies and their brokerages and get the blessing of U.S. regulators, the sources said. Robinhood could have leverage in these negotiations by arguing it would be acting as a bridge between the IPO and a major pool of investor demand, the sources added. It was not clear what kind of arrangements Robinhood would seek to put in place, and no certainty its ambition will come to fruition.
Currently, Robinhood users and other amateur traders cannot buy into stock of a newly listed company until its shares start trading. Since shares often trade higher when they debut, big funds that get allocations in the IPO have an advantage. The average first-day trading pop on U.S. listings of businesses in 2020 was 36%, according to data provider Dealogic. Robinhood plans to carve out a chunk of its shares on offer in its IPO for its 13 million users, and to use technology it is building to administer this part of the offering, the sources said. [...] It would need to negotiate agreements with companies and their brokerages and get the blessing of U.S. regulators, the sources said. Robinhood could have leverage in these negotiations by arguing it would be acting as a bridge between the IPO and a major pool of investor demand, the sources added. It was not clear what kind of arrangements Robinhood would seek to put in place, and no certainty its ambition will come to fruition.
Well, this isn't a terrible response for them... (Score:5, Interesting)
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Their credibility is gone. I'm sure there will still be customers, but I'm willing to bet a huge base of serious gamblers, the /r/wallstreetbets people, have already moved off of them. At the very least, most problem have alternative platforms they can use once Robinhood freezes the next big thing that comes along, so they can continue to buy at higher prices despite losing access on the app.
They still offer free trades backed by selling people's trading information right; could through an intermediary? Why
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Not a RH user, so no skin in that gam
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I imagine this will displease the powers that be, to put it politely.
The powers that be want this to happen. The well connected can buy at a lower price pre IPO. Underwriters will be able to sell more shares. RH investors will be subject to the IPO quiet period and be unable to get out. And that's without RH even doing anything shady.
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Re: Well, this isn't a terrible response for them. (Score:1)
IPO shares are typically locked-down for a period of time that often give an over-heated stock a chance to settle to a more reasonable (lower) price. This is likely just giving robin hood investors the opportunity to buy at a stocks highest valuation and forced to hold it as the price drops.
Reminder, IPOs aren't a one-way ticket ride, many crash down to earth pretty quickly after the initial shares are unlocked and able to be sold off.
Re: Well, this isn't a terrible response for them (Score:1)
...One-way rocket ride...
Still a bunch of marks (Score:5, Insightful)
Re: Still a bunch of marks (Score:1)
Great news! (Score:5, Funny)
When Reddit goes public with its IPO, at last I will be able to refuse to buy any of its shares, instead of just being in position of not being able to.
Robbing Hoods (Score:3, Funny)
Yeah, sure i'll trust you (Score:2)
"Robinhood aims to screw users over in new ways!" (Score:3)
Film at 11!
Seriously, after the Gamestop fiasco where they revealed themselves as just a source of suckers for the Wall Street gravy train, who's going to be stupid enough to trust them now?
"Trading has been suspended since users appear to be making a profit and this was never factored into our business model."
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Someone mod parent "Lunatic".
That'd be great... (Score:2)
I'd love to see this happen, but ... (Score:2)
I agree with whoever commented that it won't really wind up advantageous for most RobinHood users. Wall Street has surely rigged this whole IPO process to the point where their heavy-hitters with big wallets will be able to get first-dibs at the lowest prices. I suspect if RobinHood is able to pull this off, they'll still be in a queue to get those IPO orders placed, and won't exactly be at the front of the line?
As an overall trend? It seems like the players able to get in on those IPOs do make nice, qui
What is Robinhood? (Score:3)
It's easy to get mad at Robinhood if you think of them as a stock broker or investment manager. Robinhood has nothing to do with investing. It is an app for speculation on markets. If you're comfortable with online gambling then Robinhood is for you -- it's probably about as good as any online casino. They'll take your money and when you cash out you'll probably get paid. Probably. Unless they screw up their finances or decide to rip you off.
When you "buy" stock or cryptocurrency or whatever on RH you don't actually own anything. RH doesn't even buy any of it themselves. You're just entering into a contract to be paid the market price whenever you "sell". Meanwhile RH does whatever they want with your money, like buy hedging contracts so they don't go broke if the market goes the "wrong" way, or hookers and blow, or whatever.
That's one reason why the GME short squeeze keeps failing, because too many of the WSB noobs are "buying shares" through Robinhood, which means no shares are actually being bought and no pressure whatsoever is put on the market. If you buy shares through a traditional broker they actually put in market orders and take possession of shares reducing availability and driving up the price.
Re: What is Robinhood? (Score:2)
Mr. Madison, what you've just said is one of the most insanely idiotic things I have ever heard. At no point in your rambling, incoherent response were you even close to anything that could be considered a rational thought. Everyone in this room is now dumber for having listened to it. I award you no points, and may God have mercy on your soul.
I really need to get some stats on it, but... (Score:2)
I really need to get some hard data on this, but from simply observing the markets over the years I've got the impression that there is almost always a better buying opportunity several months after the IPO. The reasons for this are multiple. Among them, you have the expiration of "lockout" periods where insiders are allowed to sell. Some of these people will have been sitting on large concentrated positions in one company for years, and would be foolish not to realize gains. Also, startups sometimes ha
I always thought this was bullsh*t (Score:2)
I'm old enough to have had cash to buy into the hot IPO market during dotcom and thought it was bullsh*t that I couldn't buy IPO shares until after they got run up by the insiders. Of course, this is more like gambling than investing but hey, I can day trade once in a while.
Obligatory (Score:2)