Summary List Placement
Fintechs are hitting public markets. And they’re also plotting ways to get their own users in on hot IPOs.
In March, both SoFi and Robinhood announced plans to allow their customers to buy into companies’ initial public offerings, a privilege typically reserved for asset managers and the wealthiest of investors.
Retail brokerages — like Schwab, TD Ameritrade, and E-Trade — offering their customers shares from IPOs is nothing new. But two of the largest startup brokerages are now looking to open up the IPO market to much smaller investors, while traditional brokerages typically require customers to have upward of $100,000 in assets to participate in premarket offerings.
While Charles Schwab does not detail the minimum account balance necessary to participate in IPOs, it does describe an asset threshold in its disclosures. Fidelity, meanwhile, allows only the investors in its private client group with either $100,000 or $500,000 in assets (depending on Fidelity’s underwriting partner) to buy IPO shares. At TD Ameritrade, the threshold is either a $250,000 account balance or a minimum of 30 trades over the prior three months.
Customers of SoFi will need a minimum account balance of only $3,000 (and to be a SoFi Active Invest customer) to participate in IPOs. Robinhood has not disclosed the minimum balance that it would require to participate.
But breaking into the IPO hierarchy will be tough. Industry experts told Insider that while SoFi and Robinhood might represent a welcome challenge, it will be difficult for the upstart brokerages to compete in the highly competitive IPO marketplace.
Ahead of its own IPO, a spokesperson for Robinhood declined to comment, given the quiet period that surrounds a company going public.
But SoFi, which is also set to debut on the public markets via a SPAC offering, has its own investment-banking ambitions …read more
Source:: Business Insider