SoFi Offers Customers Early Access To IPOs: What Investors Should Know

One of the big knocks on traditional IPOs has been the lack of access that retail investors have. That process could change with SoFi announcing plans to give its customers access to IPOs early.

What Happened: SoFi, which is going public via SPAC Social Capital Hedosophia Holdings VCorp IPOE, announced a new IPO platform Friday.

Customers who have at least $3,000 in SoFi Invest accounts are eligible to invest in upcoming IPOs before the shares trade on an exchange.

See also: How to Invest in SPACs 

The service will be exclusive to the SoFi app. Users will submit an Indication of Interest and confirm their buy order.

Customers can participate in multiple pre-IPOs, but will have to compete each process separately as each IPO comes with different rules and risks.

IPO announcements and news will be readily available under the IPO Investing section of the Invest tab on the SoFi mobile app.

Investors should be aware of certain rules put in place to discourage “flipping.” If a customer sells within the first 30 days post-IPO, they will be limited to participate in future IPOs including up to a 180-day sit-out period. Multiple violations could result in a 365 day sit-out period or suspension from the IPO platform.

SoFi may also charge a $50 fee for the sale of the IPO shares in the first 120 days post-IPO and $5 for each subsequent sale within the 120-day initial window.

Related Link: Why SoFi Acquiring A Bank Is Important For Investors

Why It’s Important: The new platform from SoFi could attract new investors to its investment service. Retail traders have lacked a way to get into many of the most anticipated IPOs prior to being listed on an exchange. The IPOs often pop on their first day of trading at increase valuations from the IPO listing.

“Traditionally, access to IPOs before they’re traded on an exchange has been reserved for large institutional investors,” SoFi said Friday.

The launch of the platform sets SoFi apart from other brokerages and could be a great marketing tool to land new accounts. 

Price Action: Shares of Social Capital Hedosophia Holdings Corp V are up 0.27%% to $16.74 on Friday.

Related Link: Want to learn more about SPACs and IPOs? Tune into Benzinga's "SPACs Attack" hosted by Chris Katje and Mitch Hoch on YouTube.

(Photo: SoFi)