When it comes to the world of finance, retail investors rarely have the opportunity to live on an equal footing with their institutional counterparts. However, with new inclusive platforms like Robinhood’s IPO Access portal, could we soon see a truly fair and accessible investment landscape?

Initial public offerings represent a great opportunity for investors to buy a business before it goes public. However, for small individual investors this has traditionally been a difficult form of investment to access.

When IPOs are designed, subscribers consult with the company to define the basic terms and structure of the offer before the start of negotiations. This will include the percentage of shares allocated to institutions and institutional investors. However, given that underwriters believe that institutional investors have the resources to purchase significant amounts of IPO shares, assume financial risk, and hold those shares for the long term, the terms of the public offering initial tend to largely favor institutions rather than retail investors.

However, that could be about to change, like Robinhood, an investment platform that intends to “democratize finance for everyone ”, announced its revolutionary new feature, called“ IPO Access ”. This feature was developed to counter Wall Street’s preference for institutional inventors or high net worth individuals when it comes to initial public offerings and is designed to help retail investors access companies before their stock prices. does not soar when listing.

“We are starting to roll out IPO Access, a new product that will give you the ability to buy shares of companies at their IPO price, before trading them on public stock exchanges,” Robinhood said on his report. website blog in May. “With IPO Access, you can now participate in upcoming IPOs without a minimum account. “

The app of choice for retail investors

While this is an app that has rarely strayed from controversy in 2021, Robinhood seems committed to its promise to make finance and the world of investing more accessible to everyone.

The application ended up in hot water as a result of the GameStop short press in January of this year after the app restricted user actions around the stock. Later, Wall Street mainstays Warren Buffett and Charlie Munger both dismissed the retail investment app as a “game” platform rather than a serious vehicle to invest in.

However, Robinhood has clearly found favor with its target audience of more casual retail investors.

(Picture: BusinessOfApps)

Fascinatingly, Robinhood’s average account size is around $ 3,500 – just a fraction of its online brokerage counterparts. While the size of user accounts may seem small, it is clear that the investment app has become one of the world’s preferred platforms for investing small savings and saving change.

(Picture: Courageous New Piece)

Here we can see that Robinhood has been the most popular app to download for some margin since 2019 – with interest peaking during the initial outbreak of the Covid-19 pandemic and in the aftermath of the GameStop compression. .

According to data collected by Charles Schwab, the pandemic has led to a new wave of retail investors entering the stock market – many of whom appear to be infatuated with Robinhood’s format compared to its rivals.

Based on an analysis of around 500 investors, Charles Schwab noted that 15% of current retail investors started in 2020 – dubbing this new player in the industry “the generation investor.”

“A big part of this growth is the generation of investors – the large number of people who are linked not by their year of birth but by the start of their investment journey – who are now on the path to ownership and of meeting their financial goals, ”Jonathan Craig, Deputy Managing Director of Charles Schwab, explained to CNBC.

Path to the IPO boom

Another significant event that appears to have been driven by the Covid-19 pandemic revolves around the unprecedented increase in initial public offerings. While some businesses have struggled during the health crisis, others have thrived. These are the companies that have had a year of significant growth throughout 2020 that are looking to capitalize on it in IPOs.

(Picture: In search of the alpha)

As we can see in the chart above, global IPO revenue in the first quarter of 2021 more than tripled that of any other first quarter over the past decade, surpassing levels we haven’t seen before. seen since the peak of the dotcom boom in 2000.

This important event sheds new light on the issue of financial inclusiveness and the quality of the work Robinhood does to level the playing field.

At a time when interest in IPOs is reaching its peak, it seems reductive to deprive a whole market of investors of access to such an important event because of the size of their accounts or the wealth of households. . While Robinhood is not a perfect investment app, its work in making initial public offerings accessible to all investors is to be commended as we work towards a more financially inclusive future.