Robinhood to restrict users who 'flip' IPO shares

FILE PHOTO: The Robinhood App is displayed on a screen in this photo illustration January 29, 2021. REUTERS/Brendan McDermid/Illustration

(Reuters) - Online brokerage Robinhood Markets Inc, which recently launched an offering for retail investors to buy shares in initial public offerings, is encouraging users not to sell shares within the first 30 days of offerings.

On its website and in a recent note to customers, Robinhood warned that investors who sell or "flip" their IPO shares could be restricted from participating in future IPO deals for two months.

"We won't prevent you from selling shares you get through the IPO Access program," the company said on its website.

"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."

Rival fintech Social Finance (SoFi), which also recently launched an IPO platform for retail customers, enforces similar restrictions by collecting fines from "flippers" or customers who sell their shares to take advantage of first-day pops.

"Issuing companies and their underwriters often try to avoid IPO stock flipping. Flipping could lead us to offer fewer IPOs in the future," Robinhood, which launched the offering in May, said on its website.

Robinhood's new IPO platform is available to all customers, without any account limit restrictions. In May, FIGS Inc, which manufactures medical scrubs, became the first company to be listed on Robinhood's IPO Access platform.

The brokerage, which is soon expected to unveil paperwork for its own highly-anticipated stock market listing, will offer its IPO shares to retail customers on the platform, sources told Reuters in May.

(Reporting by Noor Zainab Hussain in Bengaluru; Editing by Anirban Sen and Ramakrishnan M.)

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