Robinhood is putting new restrictions on users who sell shares within the first 30 days after a new initial public offering (IPO), a report from U.S. News says.
Those who “flip” on those new deals could be restricted from participating in IPO deals for two months, the company said, according to the report.
“We won’t prevent you from selling shares you get through the IPO Access program,” the company said. “However, if you sell IPO shares within 30 days of the IPO, it’s considered ‘flipping’ and you’ll be restricted from participating in IPOs for 60 days.”
The company also said that flipping IPOs “could lead us to offer fewer IPOs in the future,” and that many issuing companies and underwriters try to avoid flipping.
Robinhood just launched an offering where retail investors are able to buy shares in initial public offerings, and the service is currently available to anyone with no restrictions. FIGS Inc, which makes medical scrubs, became the first company to be listed on the new Robinhood program in May.
PYMNTS reported on Robinhood’s implementation of the retail investor program recently, writing that it would allow retail investors to take part in new IPOs without the account minimums.
Investors can use the tool to search the upcoming IPOs planned to be listed on Robinhood, and request to buy shares at the initial price ranges. Then they’re allowed to review, edit or cancel requests before the shares are given out to customers.
Robinhood will also roll out its own IPO on its new program, the company said, and the company is expected to roll out paperwork for its IPO soon.
U.S. News reports that Social Finance (SoFi), a rival fintech, has also recently debuted a program to allow retail investors to dig into IPOs, and that company also has rules against “flippers,” collecting fines if they sell their shares to take advantage of first-day pops.
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