IPO Grey Market is an over-the-counter market where transactions are made in-person only by a trusted group of investors. Deals are typically handled by a community broker. In this market, an investor may sell an IPO share or an IPO application before the company is listed on the stock exchange. IPO Grey Market Premium (IPO GMP) is the premium at which IPO shares are exchanged in the gray market. Kostak Price is the price at which you can offer an IPO application for a fixed price irrespective of whether or not you obtain an IPO allocation.
What is an IPO Grey Market?
In general, an effective IPO has all its shares subscribed or oversubscribed. In cases of oversubscription, the shares are distributed on a pro-rated basis, or in situations where the subscription is too large a lottery scheme is introduced. Here, the probability of an allocation is too small. In these situations, investors are turning to the gray market for prospective sellers who have also applied for assignment.
The gray market is a term used by people on the IPO market. It indicates that the stock of the company that came up with the IPO was purchased and sold outside the stock market. The gray market is unofficial, but it is possible to buy or sell its IPO application to receive a fixed benefit from the stock. The gray market exists before the IPO listing and after the IPO launch and assignment days. The gray market premium indicates how the IPO could respond on a listing day. If the company comes up with an IPO or Rs.100 and the gray market premium is around Rs.20, then we can conclude that the IPO will list about 120 ropes on a listing day. There is no precision, but in most cases, the GMP works properly and the IPO lists the amount.
- The reference to IPO Grey Market Premium (IPO GMP) is valid for a particular date as indicated in the header.
- We do not buy and sell IPO forms on the IPO Grey Market.
- Kostak Rate is the premium that comes from selling your IPO application (in an off-market transaction) to someone else even before the problem is allocated or listed.
- Do not sign up for IPO by simply seeing Premium Price as it can alter at any time before listing. Subscribe only with a view to Fundamental of the Companies
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- IPO grey market prices can shift very rapidly and the rates may be unpredictable. It is risky to base the investment decision on the grey market IPO cost. Please refer to our section on research and study.
- Research has shown that retail investors are highly influenced by market sentiment and, as a result, are prone to over-reaction, particularly when it comes to IPO investment. Please put your bets wisely!
- The IPO GMP levels are given as a source of market intelligence. Please note that these IPO GMP rates differ depending on the geography and the demand.
- We do not deal in the grey market, nor do we promote the purchase or selling of IPO firms.
- IPO GMP is the sum of the premium and IPO orders per share of the grey market.
Why Grey market a part of the IPO market?
The grey market is unregulated, while the IPO market is an official and accepted way of raising funds on the market under the SEBI guidelines. The IPO market and the grey IPO market have no official partnership whatsoever. You know what IPO is in the share market, but it is also important to know about the grey market in IPOs. Let us explain here that the grey market is an unregulated market where interested traders can bid and sell shares in an upcoming IPO. They are not real shares of the IPO, but rather something like unofficial forwarding on the shares.
- The seller is the person who takes part in the share application to sell the shares in the grey market.
- The Dealer serves as a mediator between the customer and the seller.
- The Buyer is the person who purchases allocated or unallowed shares in the IPO from the grey market.
How does a grey market function?
- Depending on demand and market conditions, the Grey Market Premium is set. The Grey Market Premium is the amount in excess of the sale price (the sale price is the price at which the company offers its stock to investors in the IPO).
- Buyers who can buy it at this price are going to make a bargain with mediators. The mediator, in effect, is in touch with the seller. Buyers’ bids can take place before, or even after, the application is made.
- The shares are then distributed to the seller. As soon as the shares are listed, the mediator may order the seller to transfer the shares to the purchaser’s Demat account. Or it may request that the shares be sold on the stock market at the settlement price and that the sales proceeds be transferred to the purchaser.
The biggest advantage to investors is the boost in their chances of receiving shares in the event of a sale. It usually takes up to 2 weeks from the close of business before the shares are listed. The buyers on the Grey market are betting that rates will be higher on the listing day relative to the non-official price (including the Gray Market Premium) on the Grey market.