Key Points
SpaceX is allocating a large chunk of IPO shares to retail investors.
The retail investing platforms have flipping policies, with potential penalties for sellers.
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The SpaceX initial public offering (IPO) is happening on June 12, and according to reports, as much as 30% of IPO shares are going to retail investors instead of investment banks. Retail investors can submit a request to buy shares through SoFi Technologies, Robinhood Markets, and several other trading platforms, subject to eligibility requirements. Shares are not guaranteed, and the lucky investors who receive them will receive a confirmation message the day before the IPO. The shares will then be deposited into your investment account at the IPO.
But before you press the buy button, make sure you know about this important policy.
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The flipping policy
All the platforms that offer IPO access have a flipping policy. While investors can trade their shares as soon as they land in their accounts, platforms strongly discourage selling them within 30 days of the IPO, and they may take action against investors who do so.
Robinhood, for example, may bar you from IPO access for 60 days if you sell before the 30-day mark, explaining that the practice could cause the platform to become restricted from offering access to future IPOs. E*TRADE by Morgan Stanley's policy is more subjective, with a note that it "reserves the right to exclude customers from future participation."
SoFi's policy is more drastic. It will restrict IPO access for 180 days if you flip, and a second offense gets you 365 days. A third offense bars you from further IPO access, and, in any case, the platform reserves the right to charge $50 for any sales made more than 120 days prior.
If you plan to buy at the IPO and quickly get out if the stock skyrockets, you may face a penalty depending on your trading platform. Either acquaint yourself with your platform's policy and be prepared, or expect to hold on to the stock for at least 30 days.
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Jennifer Saibil has positions in SoFi Technologies. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
