101 Guide For Beginners: What Is Pre IPO Share Market?

https://stockify.net.in/buy-unlisted-shares/An initial public offering (IPO) refers to a process when private companies and corporations offer shares to the public by selling shares on the recognised stock exchange like NSE & BSE.  With an ‘Initial Public Offering,’ a company can easily raise capital from the public. However, most of these companies try placing their shares in Pre IPO Share Market before prepping for IPO. 

Primarily, companies list an IPO on two stock exchanges; The BSE (Bombay Stock Exchange) and NSE (National Stock Exchange). Both exchanges follow the same mechanism of trading, settlement process and trading timing. Before listing in an IPO, the company is counted as private or in a pre-IPO state. Though IPO is a big step towards raising funds, pre-IPO is also important to engage early inventors like family, angel investors, friends, partners and founders.  

While discussing pre-IPO (Initial Public Offering), it is important to get a better overview of the information related to unlisted shares and how this investment works.

What is Pre IPO? 

Equity shares of firms which are not open for trading on formal stock exchanges like BSE and NSE are what we call unlisted shares or stocks. For instance, OLA is a private company which is yet to list on the stock exchange. Similarly, many other companies have not gone through the IPO process yet and do not comply with the requirements of IPO (initial public offering.) Thus they have unlisted shares in the market.

Usually, startups, angel investors, employees, and private equity firms, mutual funds, & HNI investors own shares of numerous unlisted firms. Finding trustworthy and potential unlisted firms is difficult but unlisted share dealers can help you. Stockify is a leading unlisted and pre IPO share trading platform, providing accurate information about companies in pre IPO share market.

How is unlisted share available in the pre IPO share market? 

As stated earlier, an IPO is an initial platform for businesses to enter the stock market and get investors in exchange for equity. However, many companies and startups looking for early investment also sell the unlisted shares that would provide them financial backup and market exposure.  

With pre-IPO shares, you can invest in a private company, even before it releases its IPO and becomes public. One of the main reasons investors buy these shares is high capital gains. Companies sell these shares at a lower price to attract investors to buy a significant stake in the company’s unlisted equity shares.

Previously, only large companies with sufficient capital were able to get more investors through listed shares or post IPO. However, with unlisted shares investment, different companies and corporations are able to access individual inventors and facilitate the trade. In order to buy unlisted shares, the investors connect with the best-unlisted shares brokers in India. Here is how to buy unlisted shares of companies.

Through crowdfunding platforms

Mostly followed by startups, the crowdfunding platform allows a large group of investors to join together and fund small businesses for a stake in their unlisted shares. You can invest in unlisted shares through crowdfunding platforms. These platforms offer equities of startups looking for capital. Investing through crowdfunding platforms means you are helping startups to develop and grow.

Note: Equity Crowd Funding is not legal in India. This is for markets outside India.

Through financial institutions

A huge portion of investment in unlisted shares comes through financial institutions or investors with huge capital and the capability to take high risks. These institutions invest in a large number of unlisted shares due to the low prices of these shares. They expect to earn a good profit from IPO share valuation once the company goes public and lists on the stock exchange.

Through unlisted share dealers 

Most unlisted share dealers provide investors with different options to buy unlisted shares online. This buying and selling process of unlisted shares takes place on their website. If interested you need to pay the minimum amount decided by the dealers. Next in this step, the transfer of shares takes place, which might take a day after the payment transfer.

From employees of the company

At the early stages of growth, most startups and private companies provide their employees with stock ownership plans (ESOPs) to retain them and give them a sense of ownership. These are unlisted shares or pre IPO that are easily bought from the employees.

From promoters of the company

A majority of promoters have their own stock in the company. Through a process known as a private placement, you can purchase shares from them. This is where the promoters can sell their shares to a small group of people who match certain criteria.

Factors Influencing Pre-IPO Share Market

The pre-IPO share market is not regulated by SEBI (Securities Exchange Board of India), so there are multiple factors that influence the price fluctuation in the pre-IPO share market.

Here is the list of factors:

Investment Period

One of the prominent factors of the pre-IPO market is the duration for which you keep the investment. Most investors show interest in unlisted companies targeting their IPO launches, so it will be advantageous to stay for a longer period in the market. Many pre-IPO companies bring higher returns after their oversubscribed IPO introduction in the market. 

Risk Analysis 

By default, there are certain risks associated with the pre-IPO market due to the company’s internal as well as external factors. So, the assessment of risk based on multiple factors affects the market trends. One of the factors is a lower number of buyers and sellers in the market, which increases the risk of less liquidity but a high preference for price negotiations.

Company & Industry Performance 

Whether it is a listed or unlisted market, a company’s financial performance becomes an essential criterion that impacts the overall unlisted prices. Furthermore, changes in the whole industry and new developments can also have a direct impact on price fluctuation in the market. So, it is always advisable for the investor to keep their research strong for company performance to avoid heavy losses. 

You can start investing in the pre-IPO market with Stockify to ease your research along with finance expert guidance. 

Process of Pre IPO and how to gain investors in Pre IPO Share Market?  

An IPO comprehensively consists of two parts. The first one is the pre-marketing phase of the offering, where you do not have a vast platform. The second part is the initial public offering itself, where you fall under the guidelines of IPO. When a company is interested in an IPO, it is supposed to advertise to different investors and underwriters by obtaining private bids or it can also make a public declaration to generate interest. 

Unlisted shares mostly go unnoticed because they are not available for public trading. Stockify is a trusted unlisted shares dealer in India. Our professional team helps investors with in-depth research and analysis of companies to shortlist the high-returning unlisting shares. Wondering what is hot in the market? Connect with an expert pre IPO share broker today!

Table of Contents

In layman’s terms, pre-IPO shares refer to the placement of stocks before being listed on the stock exchange. They help in fundraising before the company goes public.


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Rahul Khatuwala
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