Almost every investor who seeks a high return on investment is fascinated by unlisted shares. While private companies share abundant financial information and data online with investors, it’s relatively easier to understand the value of publicly traded or listed shares than unlisted ones. Since there is no readily available or regulated market price, people often face trouble determining the actual value of their unlisted shares.
Here in this article, we will help you understand how the valuation of unlisted shares in your Demat account changes once a company goes public.
Understand The Face Value Factor In Unlisted Shares
You know unlisted shares, right? They belong to IPO-bound companies that are yet to be listed on stock exchanges. Typically, unlisted shares reflect their ‘Face Value’ in your Demat account.
What is Face Value? Simply put, the face value is a nominal amount set at the time when the share is issued and serves as an indicator of the minimum value of the share. Let’s understand this from an example.
For instance, if you own 700 shares of an unlisted company with a face value of ₹10 each, your Demat account will show a total value of ₹7000 of those shares while the share is actually trading at a higher price.
The Listed Value Post IPO
Once a company decides to go public, it undergoes an Initial Public Offering (IPO), where its shares become available for purchase by the general public. After the IPO, the shares get listed on a stock exchange, and their value is no longer confined to the face value.
The listed value, or the market value, is usually determined by the supply and demand forces in the market. Market value is subject to change throughout the trading day and is different from the face value.
Demat Account Update
The value of those (Unlisted) shares in your Demat account will automatically update once the IPO is launched and the shares start trading on the stock exchange. Now, the value of your shares will keep updating as per the market.
Let’s assume that the share is now trading at ₹20, and you purchased it at a face value of ₹10 in the unlisted market. Your Demat account will now reflect a total value of ₹14,000 for your 700 shares.
- Unlisted shares are displayed at face value in the Demat account.
- After a company releases an IPO, the shares are updated to their market value in the Demat account.
- Since market value is subject to change, the price in your Demat account will keep changing.
We are sharing information to help investors be more informed and make better decisions about whether to hold, buy, or sell their stakes in a company. Here at Stockify, we believe in educating investors to help them build wealth. If you want to buy unlisted shares in India, explore trending unlisted/pre-IPO shares here.