By Bill Alpert

Ordinary investors who worry about missing out on a warming initial public offering market should take a deep breath. Their chances of getting shares are improving.

Shares in an IPO have long been a coveted Wall Street prize. Bankers doled them out to institutions, wealthy clients, and executives who might bring future banking business. Most shares still go to deep-pocketed investors, but people with less money are starting to get more of the pie.

In recent hot IPOs like Bullish and Gemini Space Station, hundreds of millions of dollars worth of stock has gone to the clients of the retail brokers Robinhood Markets and Moomoo Financial. Issuers like the crypto platform Bullish have demanded that portions of their offering be reserved for the retail crowd. Retail participation also seems to help post-IPO price performance, according to research by the market maker Citadel Securities.

"In Gemini, we subscribed for $400 million worth in the U.S. alone, and our average customer got $15,000 worth," says Neil McDonald, CEO of the U.S. unit of Moomoo. "It's bonkers."

McDonald estimates that the firm's clients have taken down over $1 billion in shares of the last few IPOs. As part of the Hong Kong-based financial firm Futu Holdings, Moomoo subscribes for shares on behalf of Asian brokerage customers, too.

Behind the growing participation of small investors in IPOs is the rise of retail trading and investor discussions on social media. Companies like the crypto broker Gemini do business with small traders, and they want their shares to end up in the hands of their superfans.

"It's part of the broader narrative that's going on," says Robinhood's chief brokerage officer, Steven Quirk. "Small retail traders want a part of it and they don't want to be told that their accounts aren't large enough. And you're starting to see the allocations go up."

Robinhood may have been the first firm with an IPO program for its customers. Since 2021, it has gotten clients into 36 offerings. Now, many brokers have a way for customers to register their interest in participating in IPOs, though some still reserve their programs for clients with large accounts.

Fidelity, for instance, requires a minimum of $100,000 of particular assets at the firm. IPO shares can't be bought on margin, so the cash for the shares must be there.

All firms require clients to fill out forms to ensure they follow regulations that bar IPO participation by people associated with the financial services industry.

No one ever gets all the shares they would like, in an oversubscribed offering. And every broker is adamant that the final allotment isn't a function of how many a customer requests. That is meant to prevent people from overbooking.

One of the main temptations of a hot IPO is the opportunity to flip the shares for a quick profit. But brokers can punish customers who resell IPO shares within 30 days. Punishments range from a penalty fee, to a 180-day ban from getting IPOs.

How much of an allocation a customer will get depends on the broker.

Fidelity is fairly traditional, ranking customers based on their account assets, and how much revenue they have brought in through commissions, mutual fund fees, and margin loan interest.

McDonald says that Moomoo's allocations are less a linear function of a client's assets than at many brokers. Moomoo tries to get most of the shares into the hands of its midrange customers -- not the largest, and not the smallest. "We give a lot of thought into whose hands we put the shares," he says.

Robinhood may have the most democratic way of allocating IPO shares among clients who submitted a request. It uses a model that randomly selects who will get an allocation, with an equal likelihood for everyone.

"We do it very democratically," says Quirk. "I love it for the customer."

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

September 15, 2025 02:30 ET (06:30 GMT)

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