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Monday, April 15, 2024

Pre IPO Shares 101: Beginner’s Guide

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Initial Public Offering (IPO) is the procedure through which privately held unlisted companies sell their shares to the public. This is the first time they get listed on the Stock Exchange to raise capital from public investors. To get a prestigious position among the listed companies of the Stock Exchange, companies have to fulfill certain criteria and minimum standards set by the stock exchange and Securities and Exchange Commission (SEC). IPO opens the massive gates of capital flow for companies since they get to trade in the primary market. 

So, what about companies that are not eligible to sell their shares in the National Stock Exchange or the Bombay Stock Exchange? 

It is common knowledge that companies revenue to grow and expand; whether they are promising start-ups or unicorns churning up over a billion dollars in revenue. So, these companies often sell pre IPO stock privately before they go for their first Initial Public Offering. 

When selling pre-IPO stocks, companies sell them at a much lower price than their IPO price, thus, buyers make the most profitable gains when they invest in pre-IPO stocks. 

Types of Companies Selling Pre-IPO Stocks 

Pre-IPO stocks are usually sold by – 

  1. Unlisted companies – They are privately-owned companies that are not listed by the National Stock Exchange but are expected to get listed soon. 
  2. Delisted companies – Companies that have been removed from the list of listed companies by the stock exchange are delisted companies. It is noteworthy that a company can delist itself voluntarily too. Delisted companies also get listed in the stock exchange in the future. If investors holding shares of delisted companies want to sell them, then they do it in the Over-the-Counter market through save platforms such as Unlisted Assets. 

Pricing of Pre-IPO stocks 

Since pre-IPO shares are sold in the Over-the-Counter market there is no interference from the stock exchange which increases transparency between traders and buyers. However, fair pricing of the share without the exchange’s intervention is often a concern for new investors. 

This is when Unlisted Assets step in. They’ve collaborated with the valuation geniuses from the most successful transaction advisory firms in the country to bring you precise, accurate, and profit-inducing pricing. 

Benefits of Investing in Pre-IPO stocks 

Discounted selling price 

Investors can get their hands on shares with high return potential but at a much lower price than what would be offered to them when the shares go for IPO. Thus, investing in pre-IPO shares ensures much higher profits and returns. 

Early bird takes the yummiest worms 

The share market is now a highly competitive marketplace where hoards of new investors are coming in every passing second. So, when promising shares are offered for IPO, the chances of getting them are fairly low. It is best to buy pre-IPO shares if you want to stay ahead in the competition. 

Exponential Growth 

Pre-IPO is coveted for its magnificent growth potential. Companies that offer pre-IPO shares eventually grow exponentially in terms of valuation once they go through their IPO. 

So, what are you waiting for? Wasting time is equivalent to wasting money in the world of investment. So, join Unlisted Assets and start pre IPO investing. 


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