Online lending startup Social Finance Inc (SoFi) will allow
retail investors to buy into initial public offerings (IPOs) of companies, an
investment opportunity traditionally reserved for large Wall Street investors.
اضافة اعلان
SoFi’s Friday announcement comes a day after a Reuters
report revealed that online brokerage Robinhood Markets was building a platform
to “democratize” IPOs, including its own, that would allow users of its trading
app to snap up shares alongside big funds.
Large institutional investors and funds have traditionally
been first in line for such stocks, as well as the investment banks that earn big
money from arranging such offerings.
SoFi’s latest move could expand access to buying IPO shares
alongside large investment firms to everyday investors, most of whom are only
able to buy stock when the shares start trading. Nineteen IPOs of companies in
2020 had seen their shares’ value more than double in their first day of
trading.
In an interview, SoFi Chief Executive Officer Anthony Noto
said the new IPO offering was designed to encourage more long-term holders and
would penalize investors who focus on short-term profits from opening-day pops.
“We have a very different customer base, members who are
high earners, not well served,” said Noto. “It’s a client base that is
interested in investing, is actively managing a portfolio and focused on
financial objectives. Their interest is in line with issuers.”
SoFi said the latest IPO offering, which has been in the
works since 2019, will be available to anyone with an investment account with
the company and a minimum of $3,000 in the account.
Noto, who has previously headed the technology media and
telecom group at Goldman Sachs and has worked on more than 50 IPOs in that
role, said SoFi will selectively choose the IPOs it plans to offer to investors
on the platform, based on the quality of the companies.
Democratize IPOs
Currently, retail investors and other amateur traders cannot
buy shares of a newly listed company until they start trading. Since shares
often trade higher when they debut, big funds that get allocations in an IPO
have a massive advantage.
The average first-day trading pop on US listings of
businesses in 2020 was 36 percent, according to data provider Dealogic.
SoFi has already obtained regulatory clearances to operate
the new IPO platform, Noto said, adding that the company will act as a “passive”
underwriter on deals. SoFi pitched the allocation plan to issuers and will work
with banks and underwriters on allocating shares.
Like other Wall Street banks and underwriters on deals, SoFi
will collect underwriting fees from issuers for allocations.
“I’ve talked a lot about
leveling the playing field for retail investors, and am proud to say @SoFi is
aiming to do that starting today,” tweeted venture investor Chamath
Palihapitiya, whose blank-check firm struck a deal to take SoFi public in
January.
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