What’s a directed share program? | Robinhood

What’s a directed share program?

A directed share program (DSP) gives an issuing company the chance to set aside a certain number of shares, at the IPO price, for a specific group of people.

This DSP group, also known as friends and family, typically includes employees, valued customers, vendors, and others who have a relationship with the company.

DSPs are designed to recognize friends of the company by giving them an opportunity to buy shares at the IPO price. DSPs have regulatory requirements and rules around eligibility for participation.

FAQ

What’s an Initial Public Offering (IPO)?

Generally, an IPO refers to the first time a company offers its stock for sale to the public. Investment banks help the company gauge demand and set the IPO price and date. On listing day, shares become available to trade by the public in the stock market.

How to participate in a DSP
  1. If invited to participate in a DSP, use the provided link or find the company listed in the IPO Access list.

  2. Open and fund a Robinhood investing account if you don't already have one.

  3. Confirm your eligibility under FINRA Rule 5130.

  4. Review the company’s prospectus about the offering, including the potential risks of making an investment.

  5. Place your request for shares. Keep in mind, you must have buying power equal to or greater than the total cost of your request.

  6. Confirm the request. Confirmation of a valid order is not a guarantee of allocation.

  7. If you’re allocated shares, the total cost will be deducted from your buying power and the shares will appear in your investing account after the settlement. Any unused buying power held for your request will be returned to your investing account.

Are DSPs open to everyone?

DSPs are only available to people invited by the issuer. Robinhood can’t select, alter, or influence who the company invites. We administer DSPs for companies who want to reserve a portion of their offerings for certain people who might not otherwise receive an allocation of shares.

If you’re interested in investing in an IPO and haven’t received a DSP invite, you might still be able to participate. IPO Access was designed for everyone and allows all customers to have an opportunity to invest in IPOs at the IPO price.

How to transfer money in
How do I request DSP shares?

Your request lets us know the maximum amount of shares you are interested in buying. A request is also known as a conditional offer to buy (COB). A COB is like a buy order, except a COB stays as pending and doesn’t become an active order until the IPO is priced.

After confirming your Robinhood investing account has the necessary buying power, you can request DSP shares with these steps:

  1. Follow the link you received in your email or find your company listed in the IPO Access list.
  2. In the company’s stock detail page, review the company’s prospectus about the offering and the potential risks of investing.
  3. Select Confirm eligibility and agree to the terms.
  4. Select Start Request, and then enter the details of your DSP request.
  5. Review and submit the request.
  6. Wait for allocation on the IPO list day.
Note

You can only request shares after the underwriter sets the initial price range.

How many shares can I purchase?

You can request an amount of shares that is equal to or less than the amount of available buying power in your Robinhood brokerage account, including an additional 20% buffer. The buffer amount is held to account for potential price movements and is based on the highest price in the range. You may get up to $1,000 instantly after you initiate a bank deposit into your Robinhood account. You can transfer more money to your investing account at any time.

If you’d like to request more than $1,000 in shares, you’ll need to transfer the total amount at least 6 business days before the expected IPO date (transferred funds can take 5 business days to settle). Making a timely transfer helps ensure that you’ll have enough buying power available before the order window closes the night before the IPO.

The notional amount for the shares you request will be held from your buying power after submitting a request. Any unused buying power will be returned to your account upon allocation. The company may place DSP restrictions on the number of shares you can purchase.

How is a COB different?

A COB is similar to a buy order, except that a COB isn’t binding until the company’s registration statement is effective and the offering is priced within the price range in the preliminary prospectus with no material changes. You have until the end of the confirmation window to edit or cancel your COB after the final offering price.

Whether you submit a request for shares with IPO Access or as a DSP participant, you're placing a COB. You can indicate the number of shares you want to purchase. Keep in mind that a COB just means your order is eligible for an allocation of shares and doesn’t guarantee you’ll get them.

Before your COB can be accepted, the SEC must declare the company’s registration statement effective, and the final offering price must be within the price range at the time you submit your COB.

If you place a COB and you’re allocated shares, your COB becomes an order, and you’ll purchase those shares.

What’s a confirmation window for an IPO?

You can find the confirmation window dates and times on the IPO’s stock detail page. You can enter, edit, or cancel your COB or request for IPO shares up until this time. However, once this time has passed, your request cannot be changed until allocation is complete, which is typically mid-morning on the list date for the IPO.

Important: If the company’s final IPO price is above or below 20% of the anticipated price range, you must confirm your conditional offer again to buy shares within the confirmation window. If no action is taken, your request will be canceled. We’ll notify you if this happens, so you have an opportunity to confirm your request again at the new price.

Note

If the final price is within 20% of the price range, you don’t need to confirm your COB or request again. However, you only have until the end of the confirmation window to cancel. After the window closes, you can’t withdraw or change your order.

Do I need to open a Robinhood account?

You must open a Robinhood investing account or already have an account to participate in a DSP. The company will invite you to create an account in their invitation email. You can also create an account directly using the Robinhood website or by downloading the Robinhood app.

How do I open a Robinhood investing account?
  1. Submit an application in your Robinhood app.

  2. In the coming days you’ll receive an email either confirming your investing account application’s been approved or asking for a bit more information.

  3. If we request a document to verify your identity, we’ll include instructions for uploading your documents securely. Please give us five to seven days to review the materials and open your investing account.

Note

While submitting an application, you can queue one deposit before your account has been approved to ensure a smooth funding experience.

When this happens, we’ll wait until your account is officially approved before starting the queued deposit from your bank account into your Robinhood account.

How do I get started with Robinhood?

Getting started describes how to get started and open an account with us.

Can I use an existing Robinhood account?

Yes, if you already have a Robinhood investing account and have been invited to participate in a DSP, you can use it for your COB request.

Note

The email where you received the DSP invitation must match the email address on your Robinhood account. This is true for new and existing customers.

Can I transfer my eligibility to participate to a friend or family member?

No, the invitation to participate isn’t transferable and is specific to you and your email address. Only friends, family, and employees who were invited by the company and meet the eligibility requirements can participate in the DSP.

Do I need to purchase all the shares allocated?

Yes, you’re responsible for purchasing the shares that you requested if they’re allocated to you. You can cancel or edit your DSP request during the confirmation window. After the window closes, you cannot withdraw or edit your COB. If shares are allocated to your investing account, the order is processed at the IPO price. So, you should only request the amount of shares you are genuinely interested in purchasing as you may be allocated all the shares requested.

When and how to pay for allocated shares?

The total amount is held from your buying power (including the 20% buffer) when you place your initial request. This could be days before the actual IPO date when allocation occurs. Once you are allocated shares, the held buying power will be withdrawn from your investing account and any unused portions will be returned.

Can I receive fewer shares than I requested?

You may submit a request for shares and only receive some, or none, of what you requested. There are a few reasons why you might not receive all the IPO shares you request but ultimately, the company running the DSP decides who is allocated shares and how many shares each person receives.

When can I sell my shares?

Shares purchased in a DSP are freely tradable unless the company enters into a lockup agreement that limits the amount of shares certain investors can sell over a designated period.

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All investing involves risk.

Brokerage services are offered through Robinhood Financial LLC, (“RHF”) a registered broker-dealer (member SIPC) and clearing services through Robinhood Securities, LLC, (“RHS”) a registered broker dealer (member SIPC). Cryptocurrency services are offered through Robinhood Crypto, LLC (“RHC”) (NMLS ID: 1702840). Review a list of RHC licenses for more information.The Robinhood Money spending account is offered through Robinhood Money, LLC (“RHY”) (NMLS ID: 1990968), a licensed money transmitter. Review a list of our licenses for more information. Credit card products are offered by Robinhood Credit, Inc. ("RCT") (NMLS ID: 1781911 and issued by Coastal Community Bank, Member FDIC, pursuant to a license from Visa U.S.A. Inc.

The Robinhood Cash Card is a prepaid card issued by Sutton Bank, Member FDIC, pursuant to a license from Mastercard® International Incorporated. Mastercard and the circles design are registered trademarks of Mastercard International Incorporated.

RHF, RHY, RHC, RCT, and RHS are affiliated entities and wholly owned subsidiaries of Robinhood Markets, Inc. RHF, RHY, RHC, RCT, and RHS are not banks. Products offered by RHF are not FDIC insured and involve risk, including possible loss of principal. RHC isn’t a member of FINRA and accounts are not FDIC insured or protected by SIPC.

RHY is not a member of FINRA, and products are not subject to SIPC protection, but funds held in the Robinhood spending account and Robinhood Cash Card account may be eligible for FDIC pass-through insurance (review the Robinhood Cash Card Agreement and the Robinhood Spending Account Agreement).

Options trading entails significant risk and is not appropriate for all customers. Customers must read and understand the Characteristics and Risks of Standardized Options before engaging in any options trading strategies. Options transactions are often complex and may involve the potential of losing the entire investment in a relatively short period of time. Certain complex options strategies carry additional risk, including the potential for losses that may exceed the original investment amount.

Commission-free trading of stocks, ETFs and options refers to $0 commissions for Robinhood Financial self-directed individual cash or margin brokerage accounts that trade U.S. listed securities and certain OTC securities electronically. Keep in mind, other fees such as trading (non-commission) fees, Gold subscription fees, wire transfer fees, and paper statement fees may apply to your brokerage account. Please see Robinhood Financial's Fee Schedule to learn more.

Robinhood, 85 Willow Road, Menlo Park, CA 94025.© 2024 Robinhood. All rights reserved.