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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