From Bullish to Gemini: The Power of Retail Investors is Rewriting IPO Game Rules.

Understanding that retail investors, who have long been seen as "dumb money" by Wall Street, have now changed their investment dynamics from individual stocks to cryptocurrencies and now to the options market. Today, they are expanding their influence to the global stock market IPO market - and these IPO companies and Wall Street giants are welcoming them with open arms, significantly expanding the pool of stock offerings to retail investors under the massive support of retail investor groups, causing their offering prices to significantly increase and having extremely strong first day trading momentum. Take Bullish as an example, this "hot cake" in the cryptocurrency field raised a massive $1.1 billion in its IPO on the US stock market last month. The company, through internet brokers like SoFi and Robinhood focusing on retail investor groups, directly opens up the participation rights for retail investors in initial public offerings (IPOs) - a privilege usually enjoyed by the largest commercial banks on Wall Street, early venture capitalists, or wealthy clients. Insiders say that the demand for new IPOs through these channels is so strong that Bullish was able to set the offering price at $37 per share, nearly 20% higher than its originally planned upper limit. Nevertheless, this pricing was not high enough, as the stock surged 143% above the offering price in opening trading, bringing paper profits to the retail investor group that had traditionally been excluded from IPO market debuts. Retail investors are rewriting the IPO paradigm The case of Bullish has made Wall Street giants and private companies preparing to launch IPOs see that retail investor groups - who account for more than 20% of the total stock trading volume in the United States and have a profound impact on emerging markets such as cryptocurrencies and artificial intelligence - especially bring in enough fundraising amounts, thereby changing the dynamics of IPO pricing. The surge in retail participation on internet brokerage platforms also means that investment banks do not have to overly rely on institutional investors or high-net-worth clients for their existing relationships - they can offer IPO shares to almost any retail investor, thereby broadening the demand pool. The hottest IPOs of the year have accumulated from low positions "This is definitely a new paradigm," said Becky Steinthal, head of TMT Capital Markets at Jefferies, who was involved in the Bullish IPO. "Cryptocurrencies, artificial intelligence, and other buzzwords targeting global consumers are sure to see the most extreme demand from retail investors, and issuers are now choosing to allow retail investors to have a higher share in the IPO process than historical averages," she emphasized. "All of this is driven by the tech boom and demand." In the process of upcoming IPO projects to be priced in the US stock market in the coming days, the positioning of retail investors is clearly visible. Gemini Space Station Inc., a firm owned by the Winklevoss brothers, explicitly includes up to 10% of shares allocated to retail investors in its IPO, available for subscription through internet brokers like Robinhood, SoFi, Moomoo, and Webull. Other companies about to trade publicly are also following suit. The company Figure Technology Solutions Inc., focusing on blockchain finance, requires its underwriters to provide shares to retail investors through specific network brokerage platforms. The public transport software company Via Transportation Inc. is using platforms like SoFi, Robinhood, and Morgan Stanley's eTrade to sell shares to retail investors before the new stock officially begins trading on the stock market. Increased demand for IPO companies from retail investors According to Robinhood's statistics, this strategy is likely to bring strong returns to global stock market IPO candidates. The platform's demand for IPO companies has increased fivefold from the beginning of the year compared to the entire previous year, according to Steve Quirk, the company's chief broker. "We are seeing oversubscription in every order," Quirk said. "Demand always exceeds supply. Issuers like this situation and hope that more of their retail fans will get access to the stock offering." According to its CEO Tom Farley, Bullish sold one-fifth of its shares to individual investors, amounting to $220 million, which is four times the industry insiders' called "usual level." Neil McDonald, CEO of Moomoo in the US, said that Moomoo customers alone had submitted orders worth over $225 million. The brokerage platform promoted opportunities to participate in this IPO on various platforms, attracting the attention of thousands of retail investors, including competitors like Robinhood and SoFi. "The distribution of shares to retail investors is divided between traditional investment banking channels and new-generation internet-based retail brokerage platforms (such as SoFi and Robinhood), rather than being overly focused on one category," said Farley from Bullish in an interview on the day the company went public. Representatives from Bullish and its underwriters (including JPMorgan Chase, Jefferies, and Citigroup) declined to comment on the role of retail investors in this offering. Reliable partners For a long time, Wall Street has seen retail buyers as insensitive to prices, essentially viewing them as reliable buyers for IPOs, hoping to seize any first-day "pop." The result is that retail investors often buy at high prices, while large institutional participants in IPOs sell heavily for profits, leaving them with heavy losses. Nowadays, private companies no longer see retail investors as "suckers," but as reliable partners worth rewarding in IPO marketing. The desire to sell shares to retail investors can bring a degree of loyalty; and given the ongoing expansion of retail stock trading in the market, other types of crucial transactions may attract individual investors to participate. The classic tendency of this group to "buy and hold" helps support price stability, but it can also affect the trading liquidity of a stock on the first day of listing. Therefore, internet brokerage platforms like Robinhood have strict restrictions on retail investors "dumping" on a large scale within 30 days after an IPO, which may result in penalties and limit their chances of participating in other stock trades. Nonetheless, if there is a significant market correction, entering into bear market territory, or a series of poorly performing IPOs, retail investors may mass exodus from the new stock market. "There is a very typical saying that retail investors are both your friends and enemies: they often flock in large numbers when the IPO market is hot, but they will not come near you when the market is not so good," said Steinthal from Jefferies. "The trend of retail investors participating in stock market IPOs will depend on specific market conditions."