Can we sell IPO shares immediately?

Short Answer

In an Initial Public Offering (IPO) a company sells its shares to investors in order to raise money. As a retail investor, you can apply for an IPO from the primary market in order to get the shares offered by the company. Once the shares get listed on the secondary market, you can sell your shares provided you have received an allotment in the primary issue.

Detailed Answer

What is an IPO?

An IPO or Initial Public Offering is when an unlisted company gets listed on the Indian stock exchanges such as NSE (National Stock Exchange) and BSE (Bombay Stock Exchange). Historically, companies go public when they want to raise fresh capital for the company or when the existing shareholders want to sell their stake. Either way, retail investors have two ways to get shares in an IPO.

1. Pre IPO shares- Shares purchased before the IPO

2. Apply for the shares in the IPO.

The terms for selling in both these cases are different. Let’s look at if you could sell the IPO shares quickly.

Can we sell the IPO shares immediately?

As discussed earlier, there are two ways to obtain the shares of a company. It includes either buying it before the IPO through private placement companies or through ESOPS or applying in the primary market at the time of the IPO. Hence the answer to the question, “Can you sell the shares immediately?” is a Yes and No.

  1. If you have purchased or acquired the shares before the IPO, then there is a lock-in period of 1 year. You cannot sell your shares until the lock-in period of 1 year is removed. Hence, you cannot sell your shares on the date of listing.
  1. In the second case, if you apply for an IPO through the primary offer and receive the allotment. You are the owners of the shares. In such a case you can immediately sell your shares right from the moment the stock gets listed on the Indian stock exchange. There is no lock-in period for shares bought in an IPO.

Conclusion

As most retail investors get the shares through an IPO, the first scenario would not be relevant for the majority of investors. Therefore, Yes, you can sell your IPO shares immediately after the stock gets listed. There are no restrictions related to that.

Tagged With: Initial Public OfferingOffer For SalePrimary MarketEquity SharesBombay Stock ExchangeNational Stock Exchange
Categories: IPO Basics
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Discussion (2)

    IPO or Initial Public Offering is a way through which a company raises capital by giving its shares to the public. A IPO after getting listed on the exchanges can be traded by investors. The shares can be sold directly on the day of the listing since the shares have already been allotted to the investors.

    If you have applied for an IPO and received an allotment for the same, you can undoubtedly sell the shares on the date of listing. However, if the shares list at a premium (Above issue price), you can sell the majority of the shares at a profit and hold on to some of the remaining, for the long run. Whereas, if the IPO lists at a discount to the issue price, you can book the loss and look for a better opportunity to re-enter at a lower price.

Related FAQs

What is an IPO or Initial Public Offering?

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.

Can I trade or invest Rs 100 in the share market of India?

You can definitely trade or invest Rs 100 in Indian stock markets. There are no monetary requirements to enter the stock market hence you can buy any share that is trading under Rs 100. Apart from direct stock investing/ trading, there are some indirect ways to own shares over Rs 100. This can be done through Mutual Funds.

Is IPO investing good for new investors?

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.

How to sell IPO?

You can sell your shares of an IPO through the stockbroker application or website. Let's see what's the simple process to sell the shares you hold.

How will the T+1 settlement cycle affect Indian stock markets?

The T+1 settlement cycle is set to bring in many advantages to traders as investors as there will be an increase in liquidity and trading volume. There will be a subsequent reduction in the brokerage defaults and settlement auctions. On the other hand, there could be some problems like mismatch in liquidity among exchanges, FPI complications, etc.

Why did the Paytm IPO did not perform well after listing?

One97 Communications, the parent company of Paytm came up with the largest IPO in Indian history but failed to perform well. Firstly the IPO was too big for the retail investors to digest. Then the valuations were extremely high which led to the HNIs and Institutions avoiding the issue. All together the overhype in social media led to massive losses for the retail investors as the stock fell almost 40% in two trading sessions.

What is the role of FII and DII in the Indian Share market

FII and DII are two influential participants in the Indian share market. FII are foreign investors who are not located in India whereas DII constitute domestic investors who are housed within India. These investors consist of Mutual Funds, Pension Funds, and other investors who determine the direction of the Indian stock market in the short term.

Why did some of the recent IPOs gave poor listing gains? Is the IPO craze over?

IPOs have been extremely popular lately as a result of increased retail participation, ongoing bull run, and massive listing gain opportunities. However, the Indian stock markets went through a minor correction which resulted in a muted performance of some IPOs. The market negativity coupled with the lofty valuations of some of the IPOs led to poor listing gains, but the craze might not be over.

How to check IPO allotment status in India?

IPO's (Initial Public Offering) is very popular right now. Therefore getting an allotment is not easy. There are two different ways in which you can find out your allotment status. These are through the BSE India website and the company Registrar's website. Know the details and another bonus way of finding out allotment status here.

IPOs seem the modern money multiplying investment, Should you invest?

Good quality IPOs are great options for investors when considering investing in an IPO. However, IPOs should not be taken as money multiplier instruments and invested in. Multiple IPOs have performed badly due to extremely high valuations and poor financials. Hence, it is important to evaluate the financials of the company before investing in them.