Fractional Investing Aims To Make The Stock Market Accessible

Say the words “Wall Street.” Odds are you pictured the male-dominated, “Wolf of Wall Street” memes. Perhaps you liken investing to gambling.

Stock markets are at record highs despite the pandemic, and expensive share prices might seem out of reach for the masses at large. But Leif Abraham, co-CEO of Public.com, believes the platform model — where public communities can gather to share insight and discuss the ins and outs of investing — can democratize investing.

As he puts it, the traditional stock market communities — where homogeneity reigns among relatively wealthy investors and big banks, hedge funds and sell-side analysts — are effectively closed off to many would-be investors, especially younger ones. But Abraham said Public.com aims to open the doors to “people that might not have necessarily a financial background or an MBA in the pocket.”

Of investing in general, he said, “you don’t really learn these things in school.” Successful investing takes money, of course — but also financial literacy.

A $65 Million Fundraising

Abraham spoke to PYMNTS against a backdrop where Public.com recently said that it raised $65 million in Series C financing.

Drilling down into the company’s business model and mechanics, the social-investing platform lets users follow friends and industry experts in order to exchange investing ideas (via chat rooms and direct messaging). Users can also buy and sell fractional investments in individual stocks or exchange-traded funds (ETFs).

Abraham said that community-focused, network-based approach to investing stands in contrast to the communities that have traditionally been built on and around Wall Street.

He said that breaking through those stereotypes and making the stock market more approachable can have positive ripple effects through the economic landscape. For instance, Abraham noted that the stock market shapes how companies act, and even impacts how governments and banks shape their own policies.

The Benefits Of Fractional Ownership

He added that fractional ownership — where investors can buy a fraction of a single share of stock instead of a whole one — renders the market accessible to younger individuals, especially millennials. They might only have a few thousand dollars of savings at a time when shares of some popular companies (especially household tech names) often trade for thousands of dollars for a single share.

Fractional ownership of such stocks lets people become acquainted and comfortable with the market by participating in it — not by watching TV or reading books, Abraham said.

“No matter how much money you have in your bank account, if you want to buy a dollar of Amazon every single day, you can do that” on Public.com, he said.

Call it a form of learning by doing — with a community that’s more collaborative than competitive as users learn from one another’s experiences and hone their investing strategies.

For example, an individual interested in the fitness industry’s future would want to be in a group that has a Peloton instructor among its members. That would provide an on-the-ground view into the company that an analyst at an investment bank scrutinizing U.S. Securities and Exchange Commission documents might not have.

“They have actually using the product every day that this company is producing that you’re thinking of investing in,” Abraham said. “There’s true diversity of thought.”

In fact, the company estimates that 12 percent of members have expertise in tech or engineering, 8 percent work in healthcare, 8 percent have experience in retail, 6 percent are creatives and 5 percent work in education. And as many as 75 percent of the Public.com community identifies as long-term investors.

And mindful of the fact that the vast majority of the company’s users are building their financial literacy and might be investing for the first time, Public.com’s offerings don’t include riskier things like margin loans, options or day trading.

The Future

Looking ahead, Abraham said Public.com continues to grow organically and rapidly, with a membership base 13 times larger at the end of 2020 than at the beginning. He added that the community’s investments have outperformed the market at large.

And while Public.com is based in the United States — a key geographic focus — the firm also has an office in Copenhagen, Denmark and therefore has some roots in Europe.

“We’re building an experience that is welcoming of people who are new to the stock market,” Abraham said. “It’s not just about giving people access to the tools. It’s also about making the stock market approachable in the first place.”