Some early investors who pumped funds into Robinhood amid GameStop surge were granted SEC approval to sell their shares

• Some of Robinhood's pre-IPO investors were given SEC approval to sell their shares.
• Early investors, such as Ribbit Capital, pumped billions into the trading app after the GameStop trading halt.

Early Robinhood investors who pumped money into the retail-trading app amid the January GameStop surge can sell their shares, after the US Securities and Exchange Commission approved the move.

The SEC approval became effective Wednesday, a filing shows. The investors won't be allowed to sell their shares, however, until after Oct. 26 when Robinhood reports its quarterly results, according to Bloomberg, which first reported the story and cited a company statement. The investors also said they would keep half of the shares for 28 days after the SEC approval, the statement said.

The Robinhood stock sale stems from emergency funding the company raised early this year to cover a cash shortage. Robinhood had to put up more collateral at the industry's key clearinghouse as the meme stock craze in January led Robinhood to halt trading of GameStop and AMC shares, among others

Pre-IPO investors led by Ribbit Capital pumped $3.4 billion into Robinhood as the app faced customer outrage and political criticism over the trading halt, Insider reported previously.

JPMorgan analysts, led by Kenneth Worthington, warned in a recent note of increased pressure on Robinhood stock as millions of shares are unlocked in the coming months.

But the "big unlock" will be Dec. 1, when 500 million more shares are freed up, they said, rating the company at underweight with a $35 target price.

Because Robinhood gave access to retail investors in its initial public offering, JPMorgan predicted that after more shares are on the market, the retail side will have less influence on the stock. That means it will trade more on fundamentals than mere sentiment.

As of Thursday, the stock traded as $40.89, up 7.5% since going public in July. Ribbit Capital did not immediately respond to Insider's request for comment.