SAN FRANCISCO – When Vlad Tanev and Baiju Bhatt created the stock trading app Robinhood in 2013, entrepreneurs announced that their goal was to democratize Wall Street and make money accessible to all. Now that they are preparing to make their company public, they are taking those religions to a new extreme.
Mr. Tanev and Shri. Three people close to the company said Bhatt has long debated how to be more open than any offer coming in Robinhood’s initial public offerings, three people close to the company said. This week, both founders unveiled details: Robinhood plans to sell as much as a third of its .fur or 770 million app shares directly to customers through its app. The company added that anyone can participate in a special livestream of its investor presentations this Saturday.
The move is very unusual and will advance the traditional IPO process. No company has given so many shares in an outlet to everyday investors; Companies typically hold 1 or 2 percent of their shares for customers. And investor representations usually occur behind closed doors with door-to-door street companies, which have the most access to public opportunities.
But Mr. Tanev and Shri. Bhatt has been planning to change the way IPOs are conducted since at least 2019, said a person familiar with the company, who has no right to speak in public. Robinhood also chose Goldman Sachs to lead its offer, as the bank’s former IPO shares – usually reserved for commercially managed funds – led its offer because of its ability to help sell thousands of investors on Robinhood’s application.
“We know this will be the first IPO for many of you to have the opportunity to participate.” Tanev, 34, and Mr. Bhatt, 36, wrote in the Robinhood offer prospectus. They added that they wanted to keep customers on “equal footing” with large institutional investors.
But the risk of opening an IPO is significant. Robinhood faces the technical challenges of ensuring that orders for pre-IPO shares are processed easily and properly with numerous investors. And while large commercial funds tend to hold on to the stock they buy in IPOs, everyday investors are less likely to stop Robinhood’s shares from being dumped immediately.
Robinhood also allows its employees to sell as much as 15 percent of the shares on its list immediately instead of the traditional six-month wait. It can increase volatile trade.
The company’s application includes a standard industry warning against “flipping” shares within 10 days, saying it could ban Flippers from buying in future IPOs. Robinhood bankers also expect early trading to be more volatile than any other opportunity involved The person said.
If offering fur is a success, it will be recognized by Mr. Tanev and Shri. The way Bhatt’s mission and potentially hot companies change as they go public. Robinhood can also help burn its reputation after years of technical outages, user protests, lawsuits, regulatory scrutiny and fines.
R.A., a professor of business economics at Columbia Business School. “The company is taking a big risk,” Farrokhnia said. “If it works, it will be a fantastic win. If it goes badly, it will be a black mark.”
Robinhood refused to make his officers available for interviews, sitting on quiet-period rules before his instruction. Initially priced at $ 5 to each 2 per share, with Robinhood valued at about billion 35 billion, it will set a final price next Wednesday and start trading a day later.
Companies and their advisors are wary of selling a large portion of their IPO shares to retail investors. Any technical problems could invite regulatory scrutiny and lawsuits from investors, the bankers said.
In 2006, phone service provider Vonage tried to sell shares to its customers in its IPO, but due to a technical error buyers did not make it clear that their trades lasted for several days, when the stock fell. Consumers sued Vonage and regulators fined the banks that run the fur.
BATS Global Markets, the stock exchange, tried to go public on its own exchange in 2012, but experienced “technical problems” on the day of its offer and had to pull the deal. Facebook’s start in 2012 was considered a “flop” after similar setbacks in the new trading system.
Yet, Mr. Tanev and Shri. Bhatt saw a more open IPO for Robinhood’s cult. Their application has drawn millions of new investors into the world of trading, and the company has repeatedly pushed boundaries with new products, often dwarfed in hot water with regulators.
This year, Robinhood introduced IPO Access Access, a product that allows companies that go public to sell IPO shares directly to customers. This way, people can make money on the share price “P Pop P” which often happens on the first day of the company’s trading.
One company that Robinhode approached on a daily basis this year to allocate a share of its public offering was a medical scrubs company, Fig, said its chief executive, Heather Hassan. FIG eventually provides retail investors with 1 percent of its offering fur to “empower” healthcare providers who buy its clothing, Ms. Said Haas.
He said, “Our community is our brand, and our brand is our community.”
But even with such a small allocation, banks like Goldsmith are concerned about potential technical problems and harm to retail investors, said a person familiar with the offer. It was the first time such a deal was celebrated in Robinhood’s application. Figo’s stock has risen nearly 30 percent since its offer in May.
Robinhood’s offering fur isn’t likely to be easily imitated because the company is unique for its size and awareness among retail investors – and in the business of promoting retail, said Josh Bonnie, who helps law firms Simpson Thatcher and Bartlett’s capital markets.
“I think they’re more different than most companies IPO.”
Robinhood may initially have an extra level of expectation as its clients have shown they are willing to band together to fight alleged enemies on social media. The company isolated some of them when it halted trading during the January “Mem Stock” rally, while traders gathered on the Reddit platform sent shares of certain companies, such as Game Stop, on a roll-coaster ride.
Investors who lost money during trading operations were outraged – including Maharaj Hamza, a recent college graduate in Queens. He joined Robinhood in November and saw investments in penny stocks and a balloon of meme stocks, then sank by almost half during the stalled period in January. He said he felt betrayed.
“I don’t know how to get it.” Hamza, 22, said. Now that he uses the competition service Webul and has no plans to buy into Robinhood’s IPO, instead, he said he is considering reducing Robinhood stock, or is confident he will reduce the price once it is listed.
Communities While his friends in online communities are plotting similar moves, he said, some can’t leave the app easy to use. Despite the reaction, Robinhood added five million users last year and quadrupled its quarterly revenue.
“A lot of people are anti-Robinhood,” Mr. “But they still use Robinhood,” Hamza said.