All you need to know about the Gray Market IPO in India?
An initial public offering (IPO) is a process by which a privately held company raises capital by issuing shares to the public. The process of an IPO is usually done through a stock exchange and is regulated by the Securities and Exchange Board of India (SEBI). However, there is another market that operates parallel to the primary market known as the gray market. In this article, we will discuss everything you need to know about the gray market IPO in India.
The gray market is a market that operates outside the purview of the stock exchanges and regulatory authorities. It is a market where shares of a company that is yet to be listed on the stock exchange are traded at a premium. The gray market operates based on the anticipation of the demand for the shares of a company that is about to go public. The price of the shares in the gray market is usually higher than the issue price set by the company.
Investors can participate in the gray market by purchasing shares through a gray market operator or a broker. The gray market operator or broker purchases the shares from the company’s employees, insiders, or other shareholders who are eligible to apply for the IPO. The shares are then sold to the investors at a premium.
The gray market operates on the principle of “hypothetical listing.” It means that the gray market price is based on the expectation of the demand for the shares once the company is listed on the stock exchange. The gray market price is usually higher than the issue price set by the company, but it is also subject to change based on the company’s performance and market conditions.
The gray market is considered to be a riskier investment as compared to the primary market. Since the gray market operates outside the purview of the stock exchanges and regulatory authorities, there is a higher risk of fraud and manipulation. Moreover, the gray market price is based on the expectation of the demand for the shares, and there is no guarantee that the shares will perform well once the company is listed on the stock exchange.
However, some investors see the gray market as an opportunity to make a quick profit. They believe that the gray market price is usually higher than the issue price, and by purchasing shares in the gray market, they can make a profit once the shares are listed on the stock exchange.
Investors should also be aware of the difference between the gray market price and the allotment price. The allotment price is the price at which the shares are allotted to the investors during the IPO process. It is usually lower than the gray market price.
To check the IPO allotment status, investors can visit the website of the registrar of the company or the stock exchange where the company is listed. The allotment status can also be checked through the online account of the investor’s broker.
In conclusion, the gray market IPO in India is a market that operates outside the purview of the stock exchanges and regulatory authorities. It is a market where shares of a company that is yet to be listed on the stock exchange are traded at a premium. The gray market operates based on the anticipation of the demand for the shares of a company that is about to go public. However, the gray market is considered to be a riskier investment as compared to the primary market. Investors should also be aware of the difference between the gray market price and the allotment price, and check the IPO allotment status through the website of the registrar or online account of their broker. It’s always advisable to invest after considering all the risks and do proper research before making any decisions.
