Understanding the IPO Grey Market: What it is & How it Works

Define IPO Grey Market

An IPO Grey Market is an unofficial market that has no rules or regulations. Also, the Securities and Exchange Board of India (SEBI) is not associated with this type of IPO Share Market. 

How to Get Grey Market Premium?

It is simple for an investor to invest or obtain the grey market premium. It is the price of the shares that are being traded. 

Suppose a stock of X company has an issue price of Rs. 200. When it gets the Grey Market premium of Rs. 400, it will convince investors to buy the shares of X company following the new pricing of Rs. 600 (200+400). 

Benefits of IPO Grey Market

Here is the list that shows investors the benefits of the IPO Grey Market:

  1. Quality Assurance
  2. Best Effect on Economy
  3. Improve Sales Target
  4. Get at a Lower Price
  5. Lack of Warranty
  6. Convenience
  7. Reliability
  8. After-sales support

How to Sell on an IPO Grey Market?

If you wish to trade in the grey market, you can find a local dealer to sell/buy your IPO shares.

How to Evaluate the IPO Grey Market Price?

Evaluation of IPO Grey Market price is quite easy. The following ex. will guide you to learn properly: 

  • Suppose the Grey Market value is 100 rupees. 
  • However, the IPO price may exceed 200. 
  • So, 300 rupees will be the estimated listing price. 
  • As per the calculation, 50% will be the listing gain an investor will get. 

Is IPO Grey Market Safe?

In simple terms, the IPO Grey Market is an unofficial trading option. However, many investors get plenty of benefits from this market. 

The investments may be insecure here as it has an evil party that retracts every trade. Some solo and institutional investors won’t like to participate in the following risk.

Mutual funds and pension funds are parts of this IPO Grey Market. Also, the Grey Market often prefers products and imports that are alternative options for retail channels. 

The unofficial status of this Grey Market raises its riskiness for investors. 

One Last Thought!

The Grey Market has a substantial size. Different business channels and institutional investors are taking part in this trading option through Online Trading WebsitesHowever, each investment is based on a risk term. 

In case you are willing to Trading in Stocks and Shares of the IPO Grey Markets, it will be your risk to invest.