Unlisted Equity
Unlisted Equity
What are unlisted shares?
The shares which are not listed on the formal stock exchanges are referred to as unlisted shares/ stocks. For instance, JIO has unlisted shares, OLA has it as well. Similarly, many companies are yet to go public as they do not comply with the requirements for being listed on a formal stock exchange.
Unlisted shares are riskier than listed shares as its liquidity is limited since it is not listed. They are less transparent but with more stable valuations. So, if you can pick an unlisted share that has all the potential to get listed and the company has growth potential, your returns can be amplified enormously from that share.
Is it safe to buy unlisted shares?
Unlisted shares trade over-the-counter (OTC) where buyer and seller of these shares directly trade the instruments and they get connected via some intermediaries. So, this market is not regulated nor organized, and thus trading in unlisted shares bears credit risk. However, unlisted shares are generally traded between companies, big brokerage houses, and HNIs or institutional clients. So, going by the reputation of the market participants of unlisted shares, the risks get minimized. The risk also decreases if you can choose the right intermediary for trading in unlisted shares.
However, the main risk lies in the investment choice itself, that whether the company, whose unlisted shares you are buying will go public or not, the price of shares will increase or it will wind up due to no business. The only option is to do an in-depth analysis of the company’s fundamentals and other factors before investing in any unlisted share.
