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Robinhood unveils scheme allowing ‘friends and family’ to buy into IPOs at special price

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Shares in trading platform Robinhood dropped sharply this afternoon, suggesting that this week's four-day stock rally might have reached its end.
The offering will not initially include UK stocks or derivatives, it is understood

Trading platform Robinhood has announced it will allow companies issuing shares through its IPO Access system to set aside some stock for retail investors with connections to the issuer.

The online brokerage’s IPO Access platform enables retail investors to buy shares at the listing price for companies that open up access to their shares to non-institutional parties.

Under the new plans, companies will have the power to introduce an element of selection to the platform, which Robinhood has previously heralded for its “democratisation” of the part of the stock market that traditionally saw retail investors excluded.

Its new Directed Share Programs (DSPs) – or “friends and family” offering – will allow these companies to reserve a portion of IPO shares for employees, customers, vendors or others they have ties with to buy in at IPO price.

Robinhood then helps distribute the shares to the select individuals.

The fintech launched its IPO Access platform in May, as a way of giving retail investors a seat at the table during IPOs, which have traditionally been dominated by large institutions with large cash reserves.

As of the end of last month, 12 companies have partnered with Robinhood to allow retail investors to buy shares in their IPOs.