Companies going public are targeting retail investors

Companies are increasingly courting retail investors during their IPOs, with some setting aside as much as 30% of their initial shares for individuals.

Usually, banks and companies reserve shares for a select group of institutions or big money, allocating roughly 5% to 6% for novice investors.

And the move is helping companies that are going public.

Shares of Klarna jumped 14% during its IPO debut on Wednesday. The company sold 10% of its IPO to retail investors.

Crypto exchange Gemini, which debuted on Nasdaq yesterday, had kept aside 30% of its IPO for retail investors.

Investing platform Public’s COO Stephen Sikes noted that banks are now more open to offering IPO shares to retail platforms—a shift from the usual preference for institutional investors. Public is popular among everyday investors.

Companies are wooing individuals hoping for strong post-IPO rallies. And, the move allows organizations to sell their shares at a higher price to big funds.

The shift in strategy could also lure Gen Z traders.

But experts warn that this trend can backfire if institutions sell off after retail drives up prices.