One perk or incentive for working the obscenely long hours Wall Street junior level associates put in early in their career is knowing down the road they may have an opportunity to own, or get in on sone big commissions from opening shares of IPO’s.
The tradition on Wall Street is institutional investors and high-net worth individuals get an exclusive first crack at companies when they go public. Retail traders have been mostly shut out of the game, and can’t buy shares until they start trading on the exchange, and by then the price is not nearly as attractive as it was on the opening day.
SoFi announced Friday they are going to rock that world a little bit. “Main Street will have access to investing in a way they wouldn’t have before. It gives more differentiation, and more access so people can build diversified portfolios,” CEO Anthony Noto told CNBC.
The way it will work is SoFI will be the underwriter in the deals made available to retail investors. They will team up with the company going public to set the opening share price, and when they receive a portion of the IPO shares, they will now make some of their shares available to a new crop of smaller investors.
Noto is the former head of technology media and telecom group at Goldman Sachs, so he’s been involved in many high profile IPO’s, including Twitter’s.
Sofi’s clients that will be eligible to participate in the IPO’s the firm makes available will need to have a minimum of $3,000 in account value. They will then be able to make a “reservation” for the amount of shares they want to buy. The SoFi app alerts the traders when it’s time to confirm their order.
SoFi is making this opportunity for their non-active traders, who trade fewer than three times per day.
The company makes a point to remind the investors about the amount of risk that’s involved betting on companies going public. “Investing early is inherently … risky, and those are less-proven companies. In the same way as cryptocurrency, we disclose to people that these come with a higher degree of risk,” Noto told CNBC.