Wealthsimple to offer early access to IPO trading

Wealthsimple users will soon be able to purchase certain US and Canadian IPOs at the initial offering price, a form of trading that is usually only available to high-net-worth investors. 

The news: Toronto FinTech company Wealthsimple opened access to IPO offerings on its website on Thursday. Retail investors can now request shares of select companies at their offering price, as they become available. 

From the source: “Big institutions get to buy in at the offering price, while everyday investors are excluded,” Swapnil Parikh, Wealthsimple’s vice-president of product, said in a statement. That access is typically limited to institutional and accredited investors with high net worth. 

Following the thread: Retail investors are clamouring to access shares of upcoming IPO candidates such as SpaceX and Anthropic. SpaceX, for one, is targeting a valuation of $2 trillion USD ($2.7 trillion CAD)—its addition to the Nasdaq is anticipated to reshape financial markets. 

Marketplaces for pre-IPO shares—not all of them legitimate—have cropped up to feed that demand for access to private markets, while companies like Anthropic have warned against using “unauthorized” secondary markets. Competition is also heating up between pre-IPO marketplaces: this week, Vancouver private stock marketplace Hiive was sued for alleged patent infringement by US secondary marketplace Nasdaq Private Markets. 

Wealthsimple says that it’s able to offer the IPO Access feature as an “invitee of investment banks,” where the banks allocate a certain number of shares to Wealthsimple to provide to users. It doesn’t work as an underwriter nor directly with the company going public.

Final thought: Wealthsimple is anticipating high demand and tempering user expectations accordingly. If users want more shares than are available for a given company, the company says participating clients will be chosen “through a transparent process that is disclosed in advance of each IPO” and may differ between IPOs.

Disclosure: Wealthsimple vice-president of payments strategy and chief compliance officer, Hanna Zaidi, sits on BetaKit’s board of directors.

Feature image courtesy Chloe Lukas for Wealthsimple.