Introduction To IPO & GMP
In the Indian stock market, Initial Public Offering (IPO) refers to the process by which a company makes its shares available for public subscription for the first time. An IPO is an opportunity for a company to raise capital by issuing and selling shares to the public, thereby diluting the ownership of the existing shareholders.
Grey Market Price (GMP) refers to the price at which a security, such as a stock or bond, trades in an unofficial market before its official trading on a stock exchange. This price is often determined by supply and demand dynamics and can be higher or lower than the official market price once the security begins trading on the exchange.
Tactics Involved In IPO Grey Market
Tactics involved in the IPO grey market include speculative buying and selling of shares and the creation of artificial scarcity through hoarding. Participants in the grey market may also use rumours and insider information to influence the GMP and manipulate prices to benefit from the difference between the GMP and the official market price. It’s important to note that participating in the grey market carries risks, as the official market price may not align with the GMP once the security begins trading on the exchange.
How Is the Price of The Share Decided In An IPO?
The price of a share in an IPO is decided by the investment banks that underwrite the deal. They use a variety of factors to come up with a price, including the current market conditions, the demand for the stock, and the company’s financials. The price is usually set at a discount to the company’s current share price to encourage investors to buy.
What Is the Present Rate of Premium on A Share?
When an IPO Stock Market is about to launch, the present rate of premium on a share is one of the most important things for investors to consider. It is the price at which a share is traded in the Grey Market and can indicate how well the IPO is likely to perform.
How to Calculate Share Premium Account in IPO Grey Market?
The shares may trade for higher or lower prices in the Grey Market before officially being listed on an exchange.
To calculate the share premium account in the IPO Grey Market, you need to consider the following parameters:
- The current share price of the IPO company in the Grey Market.
- The number of shares being offered in the IPO.
- The deal’s total value (i.e., the amount of money raised by the IPO).
With this information in hand, you can use the following formula to calculate the share premium account:
Share Price x Number of Shares = Total Value of Deal / Share Premium Account
The Final Thought!
Present rates help you know how your IPO performs w.r.t fluctuations in GMP. So, calculate the premium account in IPO by listing officially on the exchange.
To find the present rates on a share in IPO Grey Market Premium, you should use Shoonya Brokerage Calculator.