You can invest in a private company even before its initial public offer (IPO) by buying its unlisted shares. One of the main reasons investors buy these shares is for the expected gains. Companies sell these shares at a discounted price to tempt investors to buy a significant stake of their unlisted shares.
A pre-IPO company is currently unlisted but intends to get listed in the future. You can invest in pre-IPO companies, as the shares come directly into your Demat account even though the trade happens off-record, and there’s no involvement of the exchange.
The purchase of unlisted shares can be made through brokers or direct sellers. As these stocks are not sold on the listed stock exchange, no STT (Securities Transactions Tax) is levied on these stocks.
Diversification of risk:
Unlisted shares offer different risk dynamics and can be complementary to someone who is invested in listed shares. They can be a good means to diversify the portfolio. Unlisted shares offer similar to better return potential as compared to that of listed shares.
Step by step process to sell unlisted /Pre IPO shares is as under:
- Step 1: A deal is proposed between unlisteddeal and seller either on WhatsApp or over email.
- Step 2: Seller provides their client master copy, PAN card copy, Aadhar card copy, delivery instruction slip (DIS) copy and cancelled cheque copy.
You can transfer unlisted debentures or shares of unlisted companies (pre-IPO) by using the Easiest facility from CDSL. Since the market for unlisted securities can be illiquid i.e. difficult to find buyers or sellers, you should exercise more diligence while exploring such investment opportunities.
No, the Pre-IPO shares have a lock-in period of six months. It means you can’t sell stocks before six months from the date of listing.
Can delisted stock come back?
Many companies can and have returned to compliance and relisted on a major exchange like the Nasdaq after delisting. To be relisted, a company has to meet all the same requirements it had to meet to be listed in the first place.
DIS – Delivery Instruction Slip is the way through which an investor can sell or transfer the Bellary Steel and Alloys Limited Unlisted Shares from his/her demat account to any other demat account.
The Long-term capital gains (LTCG) over Rs 1 lakh on listed equity shares per financial year is taxable at the rate of 10% without the benefit of indexation.
Unlisted shares are securities or financial instruments that are not listed in the stock market. Since the stock market is well regulated by the SEBI, and market pricing and disclosures are transparent, the risk in investing is relatively lower. This transparency and regulation is not available in the unlisted space.
Steps to sell shares using ICICI Direct
- Log in to icicidirect.com website.
- In the left navigation bar, expand ‘Equity’ and click ‘Demat Allocation’
- Click the ‘Sell’ link in front of the share you want to sell.
- Enter the sell order information.
- Confirm the order.
An unlisted security is a financial instrument that is not traded on a formal exchange because it does not meet listing requirements. Trading of unlisted securities is done on the over-the-counter (OTC) market and they are often called OTC securities.
Shareholders are also required to transfer these securities held in their demat account to the designated demat account of the company. The mode of transfer will be “off market” and you will have to get in touch with your DP to initiate such a transfer through DIS. You can read about off-market share transfer here.
Though delisting does not affect your ownership, shares may not hold any value post-delisting. Thus, if any of the stocks that you own get delisted, it is better to sell your shares. You can either exit the market or sell it to the company when it announces buyback.
A shareholder can sell or give away shares to anyone unless the company’s articles impose an effective restriction, or the shareholder has agreed not to transfer them or to deal with them in some other way in a binding contract.