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$SOFI is preparing for a world where retail investors step up and fund IPOs themselves
Back in early 2021, when the meme stock mania was happening, $SOFI CEO Anthony Noto said that the meme stock mania was evidence of the growing importance of retail traders and that the company would become an underwriter of several IPOs. So far, it was only been an underwriter for these SPAC IPOs: Social Capital Suvretta Holdings Corp I, II, III and IV. Also known as:

Like $HOOD, SoFi has been offering its customers access to a couple IPOs like $RIVN $NU and $ODD. Getting into the underwriting aspect of IPOs themselves is SoFi's way of securing more shares of IPOs that it can democratize to retail investors. Since Robinhood isn't an underwriter of any IPOs, it will have a more difficult time securing IPO access for its investors. Good thing the CEO of SoFi, Anthony Noto, was once the co-head of global technology, media, and telecommunications banking at Goldman Sachs $GS. Even as Goldman Sachs and JP Morgan $JPM are going to be the main underwriters of the Instacart IPO, SoFi will still get a piece of the opportunity.

In a Financial Times article, Angela Lee, an angel investor and professor at Columbia Business School, says that "it is obviously good to democratise access to asset classes that are normally difficult to get into" while having concern over the growing efforts to give retail traders access to IPOs at a time when institutional demand is weakening.

From a broader perspective, SoFi is hoping that by becoming an underwriter for IPOs and giving retail investors opportunities to invest in an IPO, it will be able to both reap the windfalls of IPOs and also lead the democratization of investing opportunities. Letting the gains from hot investments spread to more people helps drive consumer spending and shared economic prosperity. A rising tide lifts all boats.

Also, as more people take investing into their own hands and rely less on fund managers, the need to start bringing retail investors into the IPO funding process becomes more important. Generally, active fund managers are the ones buying shares of companies before they go public. ETFs are passively managed and I doubt it would hold any pre-IPO shares of any company. With that, retail investors are going to step up and eventually start funding the IPOs on their own, or else these companies will struggle to get the funding that they need. SoFi's management team is seeing this issue and is doing everything it can to get ahead of the issue before the need to attract retail money to fund IPOs becomes more important.

Overall, SoFi stands out in the fintech space by choosing to be more involved with the IPO process than other fintechs.
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Arnaldo Trezzi's avatar
Power to retail!

As someone who always disliked the disrespect of retail from professional finance, I love the emergence of SOFI and HOOD.
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