Accessing IPOs via Freetrade


(Kenny) #1

Companies are growing increasingly appreciative of the ‘crowd’, to a point that not having an energised and engaged crowd following is to have a competitive disadvantage.

The best way to acquire a loyal core crowd is to offer equity in the company. We’ve seen it work very well for start-ups, but I’ve not really heard (happy to be corrected) companies actively looking to secure capacity for the crowd at IPO stage.

For me it’s a part of the value chain worth Freetrade exploring i.e. securing IPO allocation to offer to its customers. Feels like a win for all parties involved and can’t think of any structural barriers in terms of the mechanics of an IPO. Can’t think of any barriers to wealth providers offering IPO access directly and from what I have read it is already a trend, but I think Freetrade are well placed to position itself as the fintech leader in this space, for a few of reasons:

  • Freetrade offer access to a ‘crowd’, not just a retail investment channel
  • The Freetrade customer base should align with the crowd that companies are looking for, in terms of demographic, diversity, engagement, mindset and ave. size of investment
  • Freetrade itself could be a preferred distribution ‘partner’ for companies in terms of corporate values, transparency etc plus the fact that Freetrade itself has an engaged and crowd representative of its customers
  • Freetrade will have the execution only architecture
  • IPOs should be considered and monitored as part of a more diversified portfolio, which you get through Freetrade

Could work well for Freetrade from a marketing perspective too, leveraging big exclusive IPOs to get the Freetrade name out there.

I’m sure there are reasons why it might not a strategic direction and/or priority for Freetrade in the near future, but wanted to throw it out there for thoughts.


(Rob Sexton) #2

We would love to be able to offer access to IPOs, but sadly as you say they’re not normally setup to give access to retail investors (for anyone not familiar with the process, this is a reasonable summary: https://www.investopedia.com/university/ipo/ipo1.asp).

As we grow in scale, and therefore clout, in the marketplace it would be great to be able to get an allocation for some of the IPOs, which we could then offer on to you. It’ll definitely be something we’ll be exploring in the future.


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(Kenny) #3

Thanks. It would be amazing to see at some stage. Had no doubts it would be on the radar and glad to hear it’s not impossible.

Do you think access to the ‘crowd’ and all the benefits that come with it is a genuine bargaining chip to get retail investors in on the action? Appreciate retail investors can buy on the open market subsequently but there is less hype and the company loses the opportunity to influence who they target and galvanise it’s army of investors / ambassadors.


(Rob Sexton) #4

I think to a certain type of company, access to a wide retail customer base would be a pretty big draw.

Not quite the scenario you’re talking about, but for AJ Bell’s upcoming IPO they’re offering shares to their customers to reward their loyalty. But easy to see that a really customer-centric brand would see the value of retail engagement

But realistically for most IPOs the company in question wants to guarantee it can place the largest number of shares. With a big enough user base we could offer to take a large enough chunk for our customers to be an attractive option.