An In-depth Analysis of Pre IPO Share To Enlarge Your Investment Portfolio

IPO (Initial Public Offering) brings a golden opportunity for investors to make money in the stock market. Undoubtedly, the stock market is a prominent platform for building wealth in the long term. According to the Indian IPO Trend Report, in 2021, the Indian stock market (Bombay Stock Exchange and National Stock Exchange) ranked 12th in the world regarding IPOs. Owing to the global IPO market over the past few months, the Indian stock market continues to seek new heights. Today, pre-IPO/ unlisted stocks have become a great way to gain wealth in the long term and offer investors an opportunity to build a portfolio that reflects risk tolerance and financial goals. 

In this write-up, we will discuss how pre-IPO shares will help you expand your investment portfolio. 

How does Pre IPO investment work?

Unlisted shares in India have gained popularity over the years, and investors with a robust financial position and a long investment horizon buy stakes before the company is listed. The investment could be risky for investors, but it can also generate high returns. It’s crucial to understand how unlisted shares work. 

Pre-IPO investment is when an individual invests in a private or public limited company before it goes public with an Initial Public Offering. Since pre-IPO shares are not traded on the stock exchange, people are unaware of these stocks; therefore, they are not open to all. Earlier, pre-IPO shares were available to banks, private equity companies, hedge funds, etc. To invest in unlisted shares, investors must pick up the right company by observing the company’s growth trend.  

In addition, pre-IPO shares come with a lock-in period during which investors are not allowed to sell or trade them. It is designed to prevent unlisted share investors from dumping their shares immediately after an IPO. 

How to 5X your return on investment with pre-IPO stocks?

The stock market is unpredictable, and there are plenty of investment portfolios to choose from. Unlike listed stocks, pre-IPO shares are a little difficult to purchase as they are long-term assets with no prior information available on the public platform. However, the potential return on the investment is massive, but investors can go a step further to 5x their return on investment in unlisted stock. The only condition is that the investors must acquire in-depth knowledge of Pre-IPO shares before investing in a particular company for a higher return. Further, if an individual invests in a company (with a high probability of going public), it will create more value for investors. Wondering what are things to keep in mind while investing in Pre IPO shares? Connect with our experts for a detailed understanding.

Different Avenues of Earning Profit Through Pre-IPO Investing

There is high profitability by investing in pre-IPO investment depending on different conditions. Also, for investors buying unlisted shares, there is a lock-in period of one year for selling it. So, there are multiple cases in which investors can earn through pre-IPO investments once the lock-in period has lapsed. 

  • Unlisted shares can be transferred to potential buyers privately off-market; it is a private deal among the investors done through a Demat account with a pre-estimated price. 
  • Another way is to take an exit from the IPO of the company, which means that investors can get the advantage of higher returns after selling pre-allotted shares. In many cases, there is more than a 40-50%   increase in the share prices that creates high profit by offering for sale. 
  • Next, if the investors find that a startup and unlisted company has a high possibility of growing in the next 4 to 5 years, they find it profitable not to wait for the company to get the list and instead start pre-IPO investment to gain more profit. 
  • With pre-IPO investments, many investors get the benefit of high discounts when buying bulk shares. So, the profitability rate gets scaled up after selling post-IPO. 

So, if investors are looking for profitable options to diversify the risk from their portfolio, they can opt for pre-IPO investment. You can use Stockify to invest in top-performing shares easily. 

Pre-IPO shares X Profitability – way to strengthen the portfolio

Pre-IPO share is attractive as it allows investors to buy shares at a steep discount before the company goes public or is listed on the stock exchange. Moreover, investment in unlisted shares is a great way to build a portfolio. Here, investors always look for ways to strengthen their investment portfolio, which include:

The Growth Factor

Since small companies release unlisted shares, they have the potential to grow higher in the future after being listed on the stock exchange. An investor must learn about the company’s growth before investing in pre-IPO shares. Like IPO, unlisted shares should also be governed by the company’s growth potential. 

Discounted Rates

Unlike listed shares, pre-IPO shares are available at lower or discounted prices. It is because the companies people invest in are small and have the potential to grow high. That’s the reason why companies offer unlisted share prices at a discount. Investors can take this opportunity to build and strengthen their portfolios. 

High ROI

Since unlisted stocks are illiquid, the shares either remain undervalued or overvalued for a long duration. Investors must try to invest when the stakes are undervalued. In the long run, investors can make huge profits if the stock gets listed on the stock exchange. 

Big Private Equity

If an investor has a considerable amount of money, apart from its expenditure, they can use it to grab a big part of the company’s private equity. When the company and its profit grow, it will return huge capital gain, and thus, the portfolio will be strengthened. 

How to Invest in Pre-IPO Shares and What It Bring to the Table?

Investment in pre-IPO shares can be a little tricky if investors are unaware of the company and its shares. Therefore, taking the necessary steps to invest in pre-IPO shares is crucial. Firstly, an investor must approach an unlisted share broker to understand the various pre-IPO shares run by different companies in India. The broker will help investors understand everything throughout the process. Secondly, go through the investment strategy with all the necessary details on what companies plan to do with the money. Undoubtedly, unlisted shares are a great way to build money and a portfolio. 
If you’re planning to buy unlisted shares in India, connect with Stockify, it is a great online platform for buying unlisted shares.

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Pre-IPO shares are less likely to be affected by market volatility. So invest in it to build your investment portfolio.


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Piyush Jhunjhunwala
Piyush Jhunjhunwala
CA, CPA, Ex. PepsiCo, Reckitt, Coty
CEO & Founder
Dubai, UAE.
Rahul Khatuwala
Rahul Khatuwala
Ex. Wipro & Finaco Founder
Bangalore, India.