Office Hours: IPOs, Net Promoter Scores, and Investing in Yourself

Retail Investors

Retail investors are increasingly being included in IPOs, a move that Scott Galloway views positively. He argues that allowing retail investors to participate can create a more dynamic market, despite the inherent risks. Scott suggests that companies should consider offering IPO shares to their customer base, as demonstrated by Airbnb's strategy with its hosts 1.

It sucks to be a grownup, and you can't expect every IPO to go up, but I think it's a good thing that we carve off more shares for retail investors.

--- Scott Galloway

This approach not only democratizes investment opportunities but also aligns the interests of the company with its most loyal supporters.

   

Deliveroo's IPO

The Deliveroo IPO serves as a cautionary tale for businesses considering retail investor involvement. Despite reserving £50 million for retail investors, Deliveroo's stock plummeted 30% shortly after its debut, highlighting the potential risks of such strategies 2. Scott Galloway notes that while offering shares to retail investors can strengthen customer relationships, it also poses the risk of damaging these ties if the IPO underperforms.

There is potential to poison your relationship with some of your most loyal customers if the IPO goes wrong.

--- Scott Galloway

This case underscores the importance of carefully weighing the benefits and drawbacks of retail participation in IPOs.