Money at 30: Robinhood’s IPO — and Trying Their IPO Access Platform
Of all the companies, apps, and tools I’ve written about between here and Money@30 the site, I feel like Robinhood is the one I’ve ended up covering the most. That’s partially because the stock trading app has not only continually rolled out new offerings since they’ve been on my radar but have also been a consistent source of fodder thanks to their self-inflicted wounds and a laundry list of controversies. Now, after years of talking about it, Robinhood is finally going public — and I don’t know what to think. Further complicating matters (at least for me) is the fact that Robinhood is offering customers the chance to buy into the IPO via their recently-launched IPO Access platform.
So, what’s the deal with Robinhood’s IPO? And how does their IPO Access feature work? Let’s take a look at both of those questions, including my personal thoughts and experience.
About Robinhood’s IPO — What We Know So Far and My Thoughts
Robinhood’s IPO basics
While we already knew that Robinhood had officially filed to go public and would be listed on the Nasdaq under the ticker symbol $HOOD, the company revealed further details earlier this week. For one, the app is likely to raise around $2 billion from the offering and is valuing itself at around $35 billion. Additionally, the FinTech answered some key questions
When is Robinhood’s IPO?
$HOOD is expected to hit the market on July 29th, 2021. However, like many of the other details, this is subject to change.
How much will shares be?
At this time, Robinhood is targeting a price range between $38 and $42 per share. Again, this could change before the big day. Plus, once shares hit the market, it’s anyone’s guess how much they’ll trade for.
How can I buy shares of Robinhood stock?
One thing that’s unique about Robinhood’s IPO is that the company is specifically setting aside shares for its customers to request. In fact, between 20% to 35% of available shares are expected to go to the app’s users. Coincidentally, the platform recently launched its IPO Access feature, which will also be how users can request IPO shares of Robinhood itself. We’ll take a closer look at how IPO Access works and how to request shares of the stock… right after I give my overall thoughts on the IPO.
My take on Robinhood’s IPO
Honestly, I’m not quite sure what to expect from Robinhood’s initial public offerings. On the one hand, it seems doomed based on the backlash the company drew earlier this year. Then again, even throughout the ordeal, Robinhood continued to attract investors and does maintain a massive userbase. Therefore, perhaps my pessimism is the result of being a little too close to the matter.
In any case, because of my mixed feelings, I wasn’t sure if I wanted to try to buy shares of $HOOD when they became available. But, in the interest of trying out their new IPO Acces feature, I decided to try requesting a couple of shares. So, let’s take a look at how that process went.
Robinhood’s IPO Access Platform — How it Works
IPO Access list
Within the Robinhood app, you’ll be able to view upcoming IPOs that are available for customer requests. The easiest way I’ve found to arrive at this landing page is to tap the Search tab and then select IPO Access under “Trending Lists.” Once there, you can browse New or Past offerings, along with the company’s proposed ticker symbol and price range.
Tapping on an upcoming company IPO will allow you to view even more info along with a timeline of what to expect as the IPO nears. This includes accessing the prospectus, which typically features an overview of the company’s notable business accomplishments, financials, and much more. Similarly, Robinhood also includes links to “roadshows,” which are typically video materials that address investor questions and the like.
If you like what you see, you can tap the “Request shares” button to start the process.
Confirming IPO Access eligibility
Before customers can request IPO shares of $HOOD or any other upcoming offering, they’ll need to confirm their ability to use IPO Access. Unlike SoFi Invest, which requires users to maintain a certain balance in order to qualify, Robinhood’s platform simply makes you agree to a few terms. This includes acknowledging that you’ll adhere to their “flipping” policy, which prohibits uses from selling IPO within 30 days of the public listing (lest they be restricted from participating in future IPOs). Additionally, you’ll need to confirm that you are not a “restricted person” and that you understand the risks associated with investing in initial public offerings.
How allocation works
You may have noticed that I’ve repeatedly used the term “request” instead of “purchase” shares. That’s because Robinhood cannot guarantee that all of the customers who request IPO shares will have their orders filled. However, the app notes that, while investor demand and the total number of available shares do have an impact on whether or not customers receive shares, other factors do not.
The following won’t affect your chances of having your IPO shares request filed:
- The size of your order
- How long you’ve been a Robinhood customer
- The value of your account
- Whether or not your a Robinhood Gold user
Before you can file your request, you’ll need to confirm that you understand these factors. If you do, tap “Start request” to move on. By the way, you can also tap “Don’t show again” if you prefer not to see this disclaimer every time you request IPO shares.
Price range or name your price
As I’ve alluded to, IPOs first declare a target price range for shares before a final price is determined. Because of this, you may not quite know how much you’ll be paying when you submit your request. Nevertheless, to help control this, Robinhood’s IPO Access offers two options for customers.
First, if you’re willing to buy the stock as long as the price is near the stated range, you can elect to submit your request accordingly. In this case, Robinhood will calculate your max share price by taking the stated price range and building in a 20% buffer. For example, since $HOOD’s upper price range number is $42, the default max share price is $50.40 — $42 + a 20% buffer. If shares end up being priced above this max, you’ll need to reauthorize/submit your request. Otherwise, your request will be valid.
Alternatively, Robinhood also allows you to name your price when requesting IPO shares. Just as this implies, you’ll be able to state exactly how much you’d be willing to pay per share. Then, if the final price comes in at or below your number, your request will be submitted.
While this process is fairly simple and straightforward, there are a couple of important things to note. First, while the Robinhood platform allows customers to buy fractional shares of several stocks, IPO Access requests can only be in whole shares. Secondly, customers must have enough buying power in their accounts to cover their requests at the time they’re submitted. So, if you’ve selected the range option, the aforementioned range + 20% buffer amount would be deducted from your buying power upon submission of your request.
“Crossing your fingers”
The final step, as Robinhood notes, is “crossing your fingers” and waiting. Customers won’t know if their orders will be filled until the morning of the IPO itself.
My experience with IPO Access (so far)
Since I wanted to try out IPO Access, I decided to request two shares of $HOOD. What surprised me about that experience was just how simple the process was. In my case, I opted to stick with the range option, which meant that $100.80 was deducted from my buying power (2 x $50.40 per share).
I also liked how $HOOD was added to my portfolio list right away. However, instead of showing a price quote, it displayed the range — and also showed in white instead of the green or red of other stock listings. By tapping on this listing, I could also alter my request if needed.
With my request submitted, now I’ll just need to wait until July 29th and see what happens. Considering how many shares Robinhood is setting aside, I’m fairly confident that I’ll end up having my request fulfilled, whereas I might not feel the same way with other IPOs. Either way, I’ll be sure to update you all if and when my shares arrive.
Final Thoughts on Robinhood’s IPO and IPO Access
For as much as Robinhood has screwed up over the years, I can’t help but be a bit excited about their upcoming IPO. What’s more, after exploring their IPO Access platform, I’m reminded about what it was I loved about the app to begin with. Thus, while I’m not sure what will happen with my IPO shares (or if I’ll even get them), I’m looking forward to seeing how things develop. And, if things go well enough, perhaps I’ll be returning to Robinhood’s IPO Access feature to try and secure shares for other company’s offerings in the future.
Also published on Medium.