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Unlisted shares of IPO-bound startups are seeing a lot of demand in grey market trading
Dear Reader,
The IPO bug has bitten a lot of tech startups and every couple of weeks there seems to be a new company eyeing the stock exchanges. It’s hard to miss the excitement around these IPOs — soon after a startup declares its plans of going public, the price of its unlisted shares in the grey market start soaring.
Like in the case of IPO-bound Paytm, where the fintech giant’s unlisted share prices rose more than two-fold from the INR 11,000-INR 12,000 range to above INR 24,000. Similarly, when Fino Payments Bank filed its IPO prospectus out of the blue, the shares of its parent company Fino PayTech jumped from INR 300-INR 325 to INR 375.
These surges in share prices even before the listing is not unique to India. However, the market for unlisted shares is not very well understood in India, as typically retail investors only take a position in a company only after it hits the bourses. This is not just about playing it safe in terms of the investment, but also sometimes, IPOs are postponed or scratched off like in the case of WeWork a few years ago, which hurts the unlisted prices also.
