Robinhood Opens IPO Doors to US Retail Investors Too

[Image source=AP Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] Robinhood, a stock trading application popular among individual investors in the U.S. for its zero commission fees, is planning to allow its users to directly purchase shares during its initial public offering (IPO) process.

According to CNBC on the 25th (local time), Robinhood, which is preparing for a Nasdaq listing, plans to give approximately 13 million users of its app the opportunity to buy shares during the IPO.

Unlike in Korea, IPO participation in the U.S. has traditionally been limited to institutional investors. As a result, large investment banks and institutional investors have pre-purchased shares before the listing, monopolizing the profits from the stock price surge on the first day.

According to financial information provider Dealogic, companies listed on Nasdaq last year saw an average stock price increase of 36% on their first day of trading. This has led to criticism that Wall Street investors, acting as stock brokers, are taking the amount that should rightfully go to the companies.

Robinhood intends to apply this approach first during its own IPO to address these practices. Since negotiations with the companies pursuing IPOs and pressure from institutional investors are expected, industry observers believe it will be easier for Robinhood, which is currently pursuing its own listing, to apply this method to its own shares first.

Subsequently, Robinhood plans to promote a system that allows individual investors to directly purchase shares during other companies' IPOs as well.

Major foreign media have evaluated that "Robinhood will erode the dominance of large Wall Street financial firms through the 'democratization of IPOs.'"

Meanwhile, Robinhood submitted its IPO application to the U.S. Securities and Exchange Commission (SEC) on the 23rd. Considering the usual review period of one to two months, it is expected to be listed on Nasdaq around May.

This content was produced with the assistance of AI translation services.