Buying the shares of companies that are not listed is an easy task these days, as there are many online platforms that allow retail investors to own shares of unlisted shares or Pre-IPO shares. Buying Pre-IPO shares have some advantages as well as disadvantages, it is discussed in detail below.
Pre-IPO shares are the shares of a company that is not listed on any exchanges such as NSE or BSE or has not come up with an IPO.
Now every company needs to raise capital for its day-to-day workings and other purposes. For that, there are 2 ways available to raise money. One is to get capital through Debt or to get the capital through selling its Equity.
When the company issues and sells its Equity, these shares are held by private investors. If these investors need to liquidate their position then they sell their shares to someone else. In this way, the shares of Unlisted companies are circulated in the market.
Yes, One can buy the shares of unlisted companies through various platforms that provide the shares of unlisted companies. Previously, to own shares of unlisted companies one had to be a “Private Equity” investor where the minimum investment ticket size was close to 2 crore rupees which are very high for an average investor.
Now there are many platforms that have given access to private Equity to retail investors in much smaller ticket sizes.
Buying Pre-IPO shares are similar to buying the shares from NSE(National Stock Exchange) or BSE (Bombay Stock Exchange). If one buys the shares of any companies, they are the shareholders of the company and are entitled to all the Dividends, Bonuses, Splits, etc. offered by the company.
In today's times IPO’s are subscribed heavily due to the heavy retail participation and the hype that is created in the Media. Due to this genuine investors are not allotted the desired quantity of shares that they wish to purchase. Buying the share Pre-IPO is a good solution to that as one can mostly get the desired quantity. Most of the time one can get the shares at a discount from the upcoming IPO price.
In buying the shares of companies that are not listed and are comparatively small, the Upside growth potential is huge compared to Listed companies. If invested in a company at its initial states then the investment can produce exponential returns in the medium to long term.
As the shares are not listed on any exchange, one would have to rely on third-party platforms for the buying and selling of these shares. It might take a long time to sell them prior to listing and the desired price might not be achieved.
Pre-IPO shares have a lock-in period of 1-year post the listing of the shares. Hence if an investor has to sell the shares as soon as it is listed then that’s not possible as the Shares held from before the IPO cannot be sold until one year from the date of listing.
By the above points, one should be clear by now that any retail investor can buy shares of companies that are not yet listed on any Sock exchanges
The minimum and a maximum number of shares are defined in Lots in an IPO. The minimum number of Lots that a retail investor can apply in the Retail Segment (RII) is 1 Lot and the maximum number of Lots that can be applied should be less than 2 Lakh Rupees. On the other hand, if one wants to apply for more than 2 Lakh rupees then they can apply in the NII (Non-Institutional Investor) category where the minimum amount for investment is 2 lakhs and the maximum amount is not capped.
IPO is alloted by following the pre-defined rule laid down by the SEBI. When an IPO is oversubscribed it gets allocated by considering the minimum lot size. If still not solved, then a computerized draw of lots is conducted.
IPOs can be a good option for beginners as they provide an opportunity to get the shares of good companies at an attractive price. Though IPOs can provide good listing gains and quick profits, good companies can help you to create massive wealth in the long term.
Options trading is different from traditional share trading in many ways. Trading in options includes multiple factors like high leverage, delivery obligation on the date of expiry, unlimited loss potential, etc. All these factors make trading in options riskier.
There are many ways to check the IPO allotment status but Zerodha doesn't provide this facility on their website.** To check the allotment status you can visit the website of the registrar of the IPO**, for example, Link Intime, Karvy. With the help of a PAN number, you can easily check the status.
IPO or Initial Public Offering is the process through which a private company goes public by offering its shares to the public for the first time.
No, the application process for an IPO can be availed with zero brokerage fees. Applying in an IPO is free of cost and you don't have to bear a fee.
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Did you ever think of investing in stock market? Can you buy a single share? Yes, you can buy one share of stock in India. There isn't any reason why you can't do so. Let's see how is it possible.