Unlisted Shares Dealer: A Beginner’s Guide

Unlisted Shares Dealer

Unlisted shares are shares not listed on formal stock exchanges. Many businesses have yet to go public because they do not meet the requirements for listing on a formal stock exchange.

Unlisted shares are highly risky than listed shares. Their liquidity is limited because they are not listed. They are less transparent, but their valuations are more stable. So, if you can find an unlisted share or an unlisted company share that has all the potential to be listed and the company has potential growth, your returns from that share can be massively amplified.

Difference Between Unlisted And Delisted Shares?

Unlisted and delisted shares are not the same thing. These two types of shares are opposed. While unlisted shares have not yet been listed on stock exchanges, delisted shares are those that were once listed but were removed from the listed stocks category for various reasons.

On OTC markets, you can trade and invest in unlisted shares, but you cannot invest in/trade delisted shares. Delisted shares are not accessible on any platform, whether formal stock exchanges or over-the-counter (OTC).

Companies have unlisted shares once they do not intend to issue an IPO or do not meet the SEBI requirements for listing the shares on any stock exchange, such as the NSE or BSE. On the other hand, companies have delisted shares once they do not adhere to any disclaimer guidelines provided by SEBI and stock exchanges. They thus are delisted from stock exchanges, or the company’s management wishes to delist the company itself.

Is It Safe To Invest In Unlisted Shares?

Unlisted shares are traded over-the-counter (OTC), which means that buyers and sellers trade the instruments directly without the use of intermediaries. As a result, because this market is neither regulated nor organized, trading in unlisted shares carries credit risk. Unlisted shares on the unlisted securities market, on the other hand, are typically traded between companies, large brokerage houses, and HNIs or institutional clients. As a result, the risks are reduced based on the reputation of market participants in unlisted shares. The risk is reduced further if you select the right middleman for trying to trade in unlisted shares.

However, the primary danger lies in the investment decision itself, whether the company whose unlisted shares you are purchasing will go public, whether the share price will rise, or whether the company will fail due to a lack of business. Before investing in any unlisted share, the only option is to conduct an in-depth analysis of the company’s fundamentals and other factors.

The Valuation

The unlisted shares are valued using the Fair market value (FMV) method. Because unlisted shares are not traded on a stock exchange and therefore have no market price, FMV is calculated by underwriters or investment bankers. To calculate the fair market value, subtract the book value of all the company’s liabilities from the valuation of all the company’s assets. The resulting amount is then multiplied by the paid-up value (PV) of share capital and divided by the total amount of paid-up equity capital (PE) as shown on the company’s balance sheet.

By Master James

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