Robinhood looks to allow users to buy directly into IPOs, report says

• Robinhood is looking to allow its users to buy directly into IPOs, including its own, Reuters first reported.
• While Robinhood could easily implement this for its own IPO, it remains to be seen how other companies will react.
• Sources told Reuters that Robinhood would still need to get the approval of US regulators.
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Robinhood is looking to allow its users to buy directly into initial public offerings, including its own, alongside institutional investors, Reuters first reported.

While the popular trading app - which confidentially filed IPO paperwork on March 23 - could easily implement this for its own debut, it remains to be seen how other companies will react to this move, knowing how limited allocations are to investors during new listings.

Further, Robinhood would still need to get the approval of US regulators and negotiate with companies and their brokerages, sources told Reuters.

Robinhood users and retail traders are currently not able to buy stocks of newly listed companies until they start trading, unlike Wall Street investors. If this initiative succeeds, it will be considered a win for retail traders as shares often trade higher when they debut in what is commonly known as a first-day pop.

The average pop on US listings in 2020 was 36%, according to data provider Dealogic as reported by Reuters.

Sources tell Reuters that the Menlo Park, California-based company plans to allocate a portion of shares on offer in its IPO for all of its 13 million users.

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