Robinhood. Brendan McDermid/Reuters
SEC approval was granted to some of Robinhood's preIPO investors for the sale of their shares.
After the GameStop trading halt, early investors such as Ribbit capital poured billions of dollars into the trading app.
Analysts at JPMorgan warned of a downward pressure on Robinhood stock if more shares are released.
After the US Securities and Exchange Commission approved this move, early Robinhood investors who invested money in the retail-trading app during the January GameStop surge may sell their shares.
A filing shows that Wednesday was the effective date for approval by the SEC. Bloomberg first reported the story, citing a company statement. The investors will not be permitted to sell their shares until Robinhood reports its quarterly results on Oct. 26th. According to the statement, investors stated that they would retain half the shares for 28 days following approval by the SEC.
Robinhood's stock sale was made possible by emergency funds the company received in early 2012 to pay for a cash shortfall. Robinhood was forced to place more collateral at the industry's leading clearinghouse because of the January meme stock craze. Robinhood stopped trading GameStop shares and AMC shares among other things.
Insider previously reported that pre-IPO investors led Ribbit Capital poured $3.4 billion into Robinhood, despite customer outrage as well as political criticisms over the trading halt.
Kenneth Worthington, JPMorgan analyst, warned that Robinhood stock will be under increasing pressure as millions of shares remain unlocked over the next months.
They said Dec. 1 will mark the "big unlock", when 500 million shares more are released.
Robinhood granted retail investors access in its initial public offering. JPMorgan predicts that the retail side will be less influential on the stock's price once more shares are available. This means that it will trade more on the fundamentals and less on sentiment.
The stock was trading at $40.89 as of Thursday. This is 7.5% more than the July public offering. Insider reached Ribbit Capital but they did not respond immediately to our request for comment.
