Democratization Of IPOs

So you have read about IPO "pops" in this chapter and want to buy IPOs. A major problem is that the majority of IPO allocations are sold to institutional investors like banks, mutual funds, and high-net worth investors who have an established relationship with the underwriter. JP Morgan has decided to change the IPO investing landscape. The company has teamed with online brokerage Motif Investing to allow small investors to participate in IPOs. Motif will allow investors to submit commission-free orders in IPOs underwritten by JP Morgan with a minimum order of $250. One risk of the new process is that while IPOs typically have very heavy trading on the first day, institutional investors tend to hold the securities for a relatively long time. Small investors may be hoping for the IPO pop and sell the stock quickly, which could lead to even larger trading volume early in the life of the IPO, with more price instability.