On this page, we have provided the grey market premium (GMP) of any upcoming and open IPOs. The exchange lists issues by IPO name, offer price, grey market premium and Kostak rates. Remember, we populate the figures from the internet, and we do not deal in the grey market.
What Is IPO Grey Market?
In fact, in an IPO, almost a parallel economy is running. Surprisingly, this parallel market is much bigger than the official markets, even though it’s illegal. We know where NSE and BSE are situated. But do we know where the grey market is? It’s all over India. It’s especially active in cities like Ahmedabad, Jaipur, Rajkot, Indore and Mumbai. IPO grey market is the unofficial and unregulated buying and selling of shares of IPOs before the IPO is actually listed on the exchange. The buyer and seller talk to each other generally over the phone and carry out the transaction. We call the price at which the shares of an IPO trade unofficially the IPO Grey Market Premium, or GMP.
Why is GMP so significant?
Once an IPO hits the exchange, the prices fluctuate based on supply and demand, and the exchange regulates the transactions. But in the grey market, speculators do the buying and selling, and these unofficial rates drive the actual IPO listing price significantly. Hence, the GMP offers a clear signal for the IPO investors.
How To Calculate the IPO Grey Market Premium?
The GMP mainly depends on the guesses of the buyer and seller. They guess where the IPO can actually be listed and trade unofficially on the basis of their guess. The actual trade takes place on the issue listing date or just after listing. Say Mr A has purchased 100 shares of an IPO in the grey market from Mr B at Rs. 200. On the listing date, the IPO opens and trades at Rs. 400. Mr A will put a buy order of 100 shares in exchange at Rs. 400, and Mr B will put sell order of 100 shares in exchange at Rs 400. Mr B then transfers the GMP of Rs 200 unofficially to Mr A in cash. This is how this parallel economy runs, and speculators trade an IPO illegally purely out of speculation.
What is the Kostak Rate?
Kostak is the price someone receives just by selling his or her IPO application in the market transaction before listing or allotment of the IPO issue.
Conclusion
Overall, IPO Grey Market Premium holds great potential for investors to benefit from pre-listing shares of promising companies. Generally, the higher a company’s expected listing price is in its initial public offering (IPO), the more attractive it is for investors interested in buying pre-list shares through this market. However, due to its inherent risks and volatility induced by speculation and rumours, one must tread carefully in such markets. The Kostak Rate is also indicative of the listing gain or loss for an IPO. Thus, understanding information related to the company’s financials and performance can help reduce its risk exposure when investing in this market.