According to Renaissance Capital, of the 64 IPOs priced this year, 40% have landed at the high end of their expected range or above. Needless to say, IPOs are hot right now and 2019 is on pace to beat out 2000 as the best year for IPOs. Several studies have also pointed out that if you buy shares of a company at their initial public offering price, you can actually beat the S&P 500.
This is great news, but for only a limited segment of the investing population. Traditionally, the IPO market is flooded with large institutional and high-net-worth investors, who have the opportunity to gain access to popular IPOs. This leaves Main Street investors empty-handed. But for the first time ever, the average investor now enjoys the opportunity to browse and purchase IPOs, thanks to ClickIPO.
This development in the capital markets sector provides a unique opportunity to online broker-dealers, but they might be wondering how offering IPOs and secondary offerings to customers would benefit them. Not only do IPOs generate significant attention from high-net-worth investors, but retail investors as well. The high demand for IPO access among retail investors has stimulated the introduction of innovative technology that makes it all possible. By partnering with ClickIPO, online broker-dealers and independent financial advisors can offer customers access to IPOs that they can’t get anywhere else, helping to drive business in multiple ways:
Attract new customers. A vast number of retail investors want access to IPOs. Purchasing IPO shares not only has merit as an investment strategy, but also offers the opportunity to hold onto a well-performing stock, driving revenue for customers and the broker-dealer. In turn, online broker-dealers who provide IPO access will likely attract new accounts because individual investor demand is so high.
Drive client engagement. Clients become more active within their investment accounts when they have the ability to invest in IPOs. In addition to having access to IPOs, customers can invest in already public companies. We’re seeing customers investing in IPOs putting more dollars into their investment accounts to invest in companies going public. Being able to select where their money goes, and having more options, is likely to increase client interest and engagement in the overall investing process.
Increase assets under management. As a financial advisor or an online broker-dealer, there are two things that drive your business: new accounts and assets under management. Online broker-dealers who partner with us have seen increases in new accounts, AUM and other transactions because of the access we provide to capital markets products. For every dollar in IPO commission that is generated, online broker-dealers see $15 in commission overall in another area. Investors looking to get in on IPOs know they need to have funds available in their accounts when a company goes public, so those investors are allocating more funds in their brokerage account when the time comes.
A savvy investor will seek out how they can invest in an IPO. If more broker-dealers offer that option to their clients, they can reap the benefits of keeping client assets under one roof. Our mission is to broaden access to and democratize the IPO market. Retail investors deserve the opportunity to act on ground-floor investment opportunities at the IPO price, just as institutional and high-net-worth investors have long been able to. Providing your clients with access to capital markets products and IPOs has the potential to significantly drive revenue and new business, all while putting you on the cutting edge of one of the most influential new trends in the field.
Risk of Investing in Initial Public Offerings (“IPOs”)
There are specific risks in investing in an Initial Public Offering (“IPO”). Among other things, the stock has not been subject to market valuation. Those risks are described at length in the prospectus, and we urge you to read the prospectus carefully to understand those risks before investing. An IPO is the first sale of stock by a private company to the public and may not be suitable for all investors. IPOs are often issued by smaller, younger companies seeking the capital to expand, but can also be done by large privately owned companies looking to become publicly traded. IPOs are a risky investment. For even experienced investors, it can be difficult to predict what the stock will do on its initial day of trading and in the near future because there is often little historical data with which to analyze the company. Also, most IPOs are of companies going through a transitory growth period, which are subject to additional uncertainty regarding their future values. Read more information regarding the significant risks associated with investing in IPOs.