Alternative banking services company SoFi unveiled a new product last month that will enable eligible members to participate in upcoming IPOs.
The tool will sit within SoFi Invest, a suite of investment tools that offers automated investment services, retirement accounts, a cryptocurrency wallet, and more.
Here’s how it works- users with at least $3,000 in their Active Invest accounts can select the IPOs they’d like to participate in by submitting an indication of interest. Once the IPO is live, investors will receive a notification asking to confirm their order and secure their shares.
If you’re a fintech veteran, this concept may sound familiar. There have been a handful of companies that have opened up IPO participation for retail investors, which are generally excluded from IPOs since they don’t generate the same revenues as institutional investors or high net worth individuals.
The first fintech to offer IPO access to retail investors was Loyal3, which was founded in 2008. The company launched a social IPO platform in 2014 that partnered with pre-IPO companies to enable them to include consumers, employees, partners, and fans in their IPO. Investors were required to purchase a minimum of $100 in stock but were not charged a fee. Loyal3, however, may have been ahead of its time. The company closed its doors in 2017.
Linqto, which recently demonstrated its platform at FinovateWest 2020, allows accredited investors to invest in pre-IPO unicorns. The company requires investment minimums ranging from $5,000 to $10,000. Among the companies currently available to investors are Impossible Foods, Ripple, and Nerd Wallet.
Yet another fintech in this arena is MarketX, a cross-border marketplace that allows investors to browse deals and invest in pre-IPO companies across the globe. MarketX currently offers investors access to pre-IPO companies in the U.S., China, Singapore, Indonesia, India, the UAE, and more. While MarketX advertises to accredited retail investors, the company requires a minimum of $50,000, a figure that is much higher than others working in this space.
With higher minimums and accredited investor restrictions, the IPO investment offerings from Loyal3, Linqto, and MarketX aren’t as accessible as SoFi’s proposed IPO investment tool. Stock trading app Robinhood, however, is also rumored to be entering this space with an offering that will compete on the same level as SoFi.
Reuters reported last month that Robinhood plans to democratize IPO investing by enabling its users to buy into IPOs. According to the news source, Robinhood is allowing its users to buy into its own IPO (which is slated for later this year) and will then use the technology it built to create a more general IPO investment tool for its 13 million users.
SoFi showcased at FinDEVr New York 2017 in a presentation about leveraging bank authentication. FinDEVr will be returning to the Finovate lineup with its own stage at this year’s FinovateSpring digital event. Check out the event page to learn more.