Robinhood is developing a system that would let those who harness its trading app buy stocks at the same time as Wall Street funds to “democratize” initial public offerings (IPOs), Reuters reported.
The company intends to set aside some of the stock available through its IPO for its 13 million users and to harness the infrastructure it is developing to handle that portion of the IPO, according to unnamed sources in the report.
Reuters said that an even more “novel” concept would be the company’s aims to let users directly buy into IPOs of firms aside from itself. In that case, Robinhood would have to strike deals with firms and their brokerages, while also receiving the go-ahead from U.S. watchdogs, the unnamed sources said in the report.
As it stands, those who use Robinhood and other non-professional investors have to wait until a newly public company’s stock begins trading to purchase shares. Large funds that have shares set aside from them in an IPO have an advantage as stocks have a tendency to rise when they make their introduction.
The news comes after it was reported that Robinhood will go public. The firm has filed confidentially with the U.S. Securities and Exchange Commission (SEC).
Robinhood has been the subject of controversy for limiting some equity trades as many retail investors rallied for “meme stocks,” such as AMC and GameStop, putting the market into disarray.
At a later time, the firm said the shutdown on some equities was powered by collateral requirements from its clearinghouse, but that explanation occurred days following the initial controversy. The matter later led CEO Vlad Tenev to be questioned on Capitol Hill.
The Robinhood app was downloaded a whopping 1.4 million times during a three-day period in January, according to estimates, but the downloading of the app doesn’t necessarily signify that the app was opened.
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