Update 3/22/2017: Cool new integration deal between StockTwits and ClickIPO.
Technology is enabling innovation at every corner of our financial economy. Banking, investing, funding, and even IPOs have seen dramatic improvement and efficiency over the past decade.
IPOs investing is available to individual investors now more than ever.
And it’s about to get even better.
A fintech startup is planning to launch a smartphone app this year that will make it easy to invest in IPOs and secondary offerings for anyone with an existing brokerage account. Best of all, this app will cater to ordinary investors, not wealthy institutional clients.
It’s not live yet, but the company is planning a beta test this spring and expects to be fully operational by the second half of the year.
The company is ClickIPO.
Scottsdale, Arizona-based ClickIPO Securities (a FINRA registered broker-dealer), aims to level the IPO playing field by utilizing technology and data analytics to disrupt the current IPO allocation process. It’s led by finance and startup veterans Scott Coyle, James Farrelly, Jerrod Bailey, and Vann Gutierrez.
How It Works
In the traditional IPO process, large institutional buyers usually get about 80% of the shares. Too often, many of the other 20% of allocated shares fall into the hands of “flippers”, those who turn around and sell the shares for a quick profit. Flipping shares may cause unwanted volatility and apply downward pressure on a newly issued stock.
Underwriters are looking for a way to decrease the negative impact of flippers but haven’t had much success in the current allocation model.
This is where ClickIPO comes in.
ClickIPO’s platform connects the underwriters, retail investors, and online brokerages. Underwriters have access to a dashboard where they can allocate shares to the ClickIPO platform.
IPO investors simply download the app and connect to their current online broker. There’s no need to open a new brokerage account.
Investors can evaluate opportunities and place orders directly through the app. Once allocated, shares are dropped into the investors’ existing brokerage accounts. The broker-dealers have a dashboard for compliance and easy integration into their systems.
Investment minimums and maximums will be determined by the broker-dealers. Minimums will likely be in the low hundreds.
The ClickIPO Investor Score
As a way to protect the underwriters and issuing companies against flippers, ClickIPO will have an Investor Score associated with each investor on the platform. The ClickIPO Investor Score is based on a proprietary algorithm based on many factors, but primarily rewards longer-term holders and punishes flippers.
For example, if a member sells shares in the first 30 days of trading, their ClickIPO Investor Score goes down. The shorter the holding period, the worse for the score.
If the investor holds the stock for 30 days or more, the score increases (the longer the better).
The app prompts investors to let them know if an action will increase or decrease their score.
This scoring system is designed to provide the underwriters with more desirable investors. With longer-term investors on the platform, underwriters benefit from allocating more shares to ClickIPO, and members benefit from more access to IPOs.
For high-demand IPOs with a limited number of shares, investors with the highest ClickIPO Investor Score receive the best allocations.
The Beta Test
ClickIPO is planning a beta test this Spring. A limited number of investors will be invited to use the app to evaluate IPOs and potentially invest in upcoming opportunities. The beta will start with limited underwriters and a few online brokers. As the year progresses, the platform will slowly expand to include more underwriters and online brokers.
The ClickIPO website is currently accepting applicants to join its wait list for the beta test. Space is limited and on a first-come, first served basis. You can add your name by clicking the button below and filling out the simple form:
Make sure to check out the video on the home page. The intent is to eventually partner with all underwriters to provide access to all IPOs and secondary offerings for millions of individual investors.
It’s exciting to hear about a startup directly targeting our community’s primary objective: more access to more IPOs.
ClickIPO is operating in a highly-regulated industry, so they’ll need to be fully compliant and make sure the technology and relational pipelines are seamless before hitting the mainstream. The beta may be an awesome opportunity to see where this venture is headed.
Though optimistic, I’m concerned that the good ‘ole boy Wall Street networks will reject such a platform because there aren’t enough shares to go around.
To get some insight on this, I reached out to one of the founders, Scott Coyle. Here’s what he said:
We believe that retail investors deserve access to all IPO and secondary offerings. We also have existing selling group agreements with a number of underwriters that have indicated they will allocate shares to us because our investor scoring system attracts the types of buy and hold investors desired by underwriters.
The story here makes sense. Shares allocated to the platform will go to more desirable investors (as measured by the score) instead of flippers. In return, underwriters receive analytics data about the investor pool then uses the platform to lessen the burden of the allocation process.
A seamless user experience integrating the app with existing accounts should attract main street investors in droves. With high demand for shares, an excellent ClickIPO Investor Score will be critical. That means investors will need to hold onto shares.
I’ve signed up for the beta and hope we all get a chance to try this forthcoming platform. Based on the model, it seems the earlier we can start building our ClickIPO Investor Scores, the better.
What do you think? Does the current IPO landscape have room for ClickIPO? Add your insights in the comments section below.