Online finance company Social Finance Inc. will offer its customers the ability to invest in initial public offerings before trading begins, the company announced Friday. Organizers traditionally reserve IPO investing for large institutional investors or individuals with ultrahigh net worth.
SoFi said it would give clients with more than $3,000 in their accounts early access to IPOs.
Online trading app Robinhood is also reportedly working on a plan to offer IPO investing. It comes at a time when the IPO market is churning out newly-minted publicly traded companies at an unprecedented pace. That’s due to Special Purpose Acquisition Companies. The amount of SPAC IPOs thus far this year has already surpassed the 248 last year.
SoFi is set to go public itself by merging with a SPAC named Social Capital Hedosophia. The transaction values SoFi at $8.65 billion.
Additionally, Robinhood on Tuesday filed confidential paperwork to also go public, the company confirmed in a blog post.
No Access To IPO Investing
Currently, retail traders don’t have a way to get in on IPO investing. They must wait until shares start trading.
It’s the large institutional investors and high-wealth individuals that get shares of an IPO at the final pricing, usually the night before the stock begins trading on an exchange such as Nasdaq. By that time, the price has often gapped higher.
Highly popular IPOs have jumped more than 50% or higher at the IPO. However, shares might also drop.
“SoFi recognizes that investing in IPOs is inherently risky and we are committed to clearly disclosing the risks and benefits associated with this type of investment opportunity,” the company said in its announcement.
Founded in 2011, San Francisco-based SoFi, no relation to U.K.-based nonprofit consultancy Social Finance, initially focused on student loan refinancing. It now offers stock and cryptocurrency trading, personal and mortgage loans, and wealth management services. It has more than 1.8 million members.
Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.
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