Today, unlisted shares have become more popular among investors who are looking for investment opportunities beyond the traditional stock market. Many well-known and big companies are giving a chance to buy their shares before they go for an IPO.
However, unlisted shares follow a different process from listed shares. You can easily buy and sell listed shares but with unlisted shares, the scene is different. You can not sell and buy unlisted shares at your desired time, as there are some rules, restrictions, and regulatory conditions with unlisted shares. In this article, we are going to talk about what unlisted shares are, how we can sell or buy them, the profits, risks, and their regulatory conditions.
What Are Unlisted Shares?
Unlisted shares are the shares of the companies that are not listed on any recognized stock exchange such as the Bombay Stock Exchange (BSE) or the National Stock Exchange (NSE). Because these companies’ shares are not publicly traded, they are bought and sold by private transactions. Some investors consider unlisted shares for investing because they offer an opportunity to invest in growing companies before they become publicly listed.
How to Buy Unlisted Shares in India
Buying unlisted shares is relatively simple when it’s done through a trusted and reliable intermediary.
1. Choose a Reliable Advisor or Platform
The first step to buy unlisted shares is to find a reputable broker, investment advisor or a platform that deals in unlisted shares. It is very important to work with a trusted source that ensures the authenticity of the transactions.
2. Select the Company
Then, do proper research to figure out the right company for investing. Make sure for the factors like the company’s business model, financial performance, growth potential, and industry position.
3. Complete the Transaction
Once you find the right company and decide to invest in it, you can buy the shares of the company through an off-market transaction. In this, payment is made directly to the seller or through intermediates who are handling the deal.
4. Receive Shares in Your Demat Account
After the translation is completed, the shares of the company you bought are transferred to your bank’s demat account. This share transfer process usually takes a few days, which mostly depends on the transaction and documentation requirements.
How to Sell Unlisted Shares
Selling the unlisted shares is very similar to buying them. You only have to find interested buyers of your shares.
1. Find a Buyer
You can sell your unlisted shares directly to the buyer, or you can sell them through a broker, investment platforms and advisors who deal in the unlisted shares.
2. Agree on the Price
Unlisted shares are not traded on any exchange platforms that why their pricing is vary on the basis of the share’s demand, supply, performance, and market sentiments.
3. Transfer the Shares
Once the buyer is found and both parties have agreed on all the pricing, the unlisted shares are transferred from your Demat account to the buyer’s account through an off-market transaction.
4. Receive Payment
After the transfer is completed. The agreed payment is credited directly to your bank account.
Benefits of Investing in Unlisted Shares
- Opportunity to invest in companies before they list for IPO
- Having a potential for long-term wealth creation
- Portfolio diversification beyond listed stocks
- Access to growing businesses at an early stage
Risks You Should Know
While the unlisted shares offer benefits, they come with many risks that include:
- Having lower liquidity compared to listed shares
- Limited public information about some companies
- Right pricing discovery can be challenging
- Also, having a higher investment risk if the company does not perform well
Because of these risks, investors should always conduct proper research before investing in any company.
Are Unlisted Shares Suitable for Everyone?
Unlisted shares are suitable for long-term investors who are comfortable with higher risk. Beginners should understand all the fundamentals of the company before investing, or they can simply get advice from a trusted unlisted shares and pre-IPO advisor like Pre-Nivesh Capital.
A trusted unlisted shares advisor can help you to better understand the company, its share value, where you can sell or purchase shares to make a huge profit, and other things that help you to make informed decisions.
Final Thoughts
An unlisted share offer to investors is a unique opportunity from which they can invest in major companies before it reaches the stock market. The buying and selling process of unlisted shares is easy and straightforward when it is done through a trusted intermediary. However, unlisted shares involve benefits and risks, so it’s important for investors to understand this before investing.