Robinhood IPO: What to Know if You're Buying Shares
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Here's your money briefing for Wednesday, July 28th. I'm J.R. Whalen for The Wall Street Journal. Stock traders who use the Robinhood app should mark Thursday on their calendar. That's when the brokerage firm is expected to go public and Robinhood customers will have access to shares before they do.
So normally, IPOs are very difficult to access. Companies typically want to save the majority of the available shares for big investors or huge firms, big institutions. Robinhood says they're going to be saving somewhere between 20 to 35 percent of those shares purely for Robinhood customers.
So how can retail investors participate? And what are the risks of buying shares before a company goes public? We'll ask WSJ personal finance reporter Julia Carpenter about that after the break.
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When will Robinhood's IPO and early customer access happen?
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Robinhood traders can be a risky bunch. The active ones have a reputation for trading in and out of so-called meme stocks, and many have endured the whiplash of watching their investments go up and down like a roller coaster. But this week, many will get a taste of a different kind of risk, the ability to buy shares of the trading app before its initial public offering on Thursday. WSJ personal finance reporter Julia Carpenter is here with what to keep in mind for those looking to go down the IPO road. Julia, thanks for being with us.
Thank you for having me.
So you know it's pretty rare that a company lets smaller retail traders get in on the company's IPO, even at their customers. So let's start with the basics here. What is an IPO and what can we expect to happen on Thursday?
So an IPO stands for initial public offering. This is what happens when a company, a private company, goes public. So when they start trading shares on the stock market. We can expect that a lot of Robinhood users will be really excited about this, that people will be watching how the stock price changes when Robinhood debuts on the Nasdaq. But this is something we've seen in the past, too, with other big companies. There's what's called hot IPOs and cold IPOs.
What's the difference?
So a hot IPO is a very buzzy one. It's one that everyone wants to get in on, that people are talking about, that the stock price and the offering price are expected to be much higher. Cold IPOs are some of those smaller companies that go public. Maybe they don't have the name recognition or the attention on them as much, and so they're a bit more accessible for the average investor.
How is Robinhood making its IPO unusually available to retail customers?
Okay, so it's safe to say the Robinhood IPO qualifies as a hot IPO. Why has this IPO in particular gotten so much attention?
Robinhood IPO is getting a lot of attention because they're doing something unusual. They're making the IPO available to their customers. So normally, IPOs are very difficult to access. Companies typically want to save the majority of the available shares for big investors or huge firms, big institutions. Robinhood says they're going to be saving somewhere between 20 to 35% of those shares purely for Robinhood customers.
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