(Reuters) – Online brokerage Robinhood Markets Inc said on Wednesday it would allow companies issuing shares through its IPO Access platform to set aside some stock for members of the public with ties to the issuers.
Directed Share Programs (DSPs), which Robinhood refers to as its “friends and family” offering, allows employees, customers, vendors, or others who have a relationship with the issuing company an opportunity to buy shares at the IPO price.
Large institutional investors and funds have traditionally been the first in line for allocations on IPOs, as the investment banks that control share allocations typically prioritize deep-pocketed Wall Street clients.
That typically leaves most retail investors with no option but to buy into stock of a newly listed company only after its shares start trading – which often means paying a higher price.
Robinhood has partnered with 12 companies that have made their IPOs available to its customers, as of October 31.
Its latest offering will make IPO shares accessible to an even bigger pool of retail investors.
(Reporting by Noor Zainab Hussain in Bengaluru; Editing by Krishna Chandra Eluri)