Robinhood Just Won Approval to Underwrite IPOs, Right Before SpaceX's Blockbuster Market Debut. Here's Why the Timing Matters.

CEO Vlad Tenev said this week that Robinhood Securities is now approved to serve as an IPO underwriter.

The approval comes just days before SpaceX's market debut, which is expected to be the largest IPO ever.

Underwriting fees could give Robinhood revenue that doesn't depend on customer trading activity.

Robinhood (NASDAQ: HOOD) had no shortage of news this week. The online brokerage reported strong May operating data, and a securities filing revealed a large insider stock purchase. But the announcement with arguably the biggest long-term implications came from CEO Vlad Tenev, who said Tuesday in a post on X that Robinhood Securities is now approved to serve as an underwriter of initial public offerings (IPOs) .

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The news is timely. SpaceX is expected to begin trading on the Nasdaq on Friday in what could be the largest IPO in history, and a long list of big private companies may follow it to the public markets in the coming years. Here's a closer look at the new business line -- and why its timing could prove important.

Until this week, Robinhood's role in public offerings was distribution. The company's IPO Access product, launched in 2021, lets customers buy shares of select offerings at the IPO price before they start trading. But the shares available through IPO Access are allocated by the investment banks running the deal; Robinhood has participated as what's known as a selling group member.

Underwriting is a different business. Underwriters work directly with the company going public, helping set the offering's price and place its shares with investors. And the issuer pays fees for that work.