Every day, there is a huge market running behind the stock exchanges’; formal ones. This is the market chiefly for unlisted shares. On the formal stock exchanges, the shares which failed to be listened to are described as unlisted stocks/ shares. Many companies are yet to mainly go public as they failed to comply with the requirements to be listed on a stock exchange as a formal one. In case, a person picks an unlisted company share price having all the potential for getting listed, and there is growth potential in the company, the returns can be enormously amplified from that share.
- Independent Businesses- Such segments comprise the companies which have models of conventional business without parentage. This kind of business player is pure without being of any other listed entity’s subsidiary.
- New Age Companies- They are companies of internet-based which are referred oftentimes to as startups. These kinds of companies are aimed at niche segments such as gaming, e-commerce, fintech, etc.
- Parent Backed- This kind of company is owned by a renowned and strong parentage that is listed already on the stock exchanges.
- Price mechanism- They are a pure game of demand and supply that test the investor’s wisdom. As the exchanges are failed to be comprised in such mechanisms, the discovery of fair price is under scrutiny.
- Not traded on exchanges- On a particular exchange, the shares of unlisted companies are failed to be officially traded. There is a distinctive market for this segment in which mainly sellers and buyers operate through dealers.
- Growth factor- It enables investors to stakes buying in the company which is either new generally in terms of business model or technology. That’s why the pricing is much more reasonable in comparison to the listed space.
- Dematerialized- The transferring within the Demat account be done. After the status checking of unlisted shared bought through the account of depository participants in which their availability is at face value.
The unlisted shares trade OTC or simply over-the-counter in which seller and buyer of such shares trade directly the instruments, and also they get linked through some intermediaries. Thus, this market fails to be organized nor regulated and resulting in the trading in unlisted shares bearing the credit risk. But the unlisted shares are traded usually between big brokerage houses, companies, and institutional clients or HNIs.
Thus, going by the market participants’ reputation of unlisted shares, there is minimizing of risks. Also, the risk decrease in case, the right intermediary is chosen for trading in unlisted shares. But the chief risk lies in the investment choice that the company, whether whose unlisted shares are being bought goes public or not.
It can be concluded that unlisted share buy markets have over the years gained popularity in mainly recent years. The investors along with strong financial health, sound wisdom, and a horizon of long investment, buy stakes in the companies as growing, even before the IPO, and see the compounding’s real magic.