In todayÕs fast-paced world of investing, savvy investors are constantly on the lookout for new avenues to grow their wealth. While the stock market is often the first stop, thereÕs an exciting trend thatÕs gaining momentumÑpeople are increasingly opting to buy unlisted shares.
But what exactly are unlisted shares? Why are they attracting attention? And how can you get in on the action? LetÕs break it down.
What Are Unlisted Shares?
Unlisted shares are the shares of companies that are Buy unlisted shares, like the NSE or BSE in India or the NYSE or NASDAQ in the U.S. These are typically startups, pre-IPO companies, or small-to-mid-sized businesses that choose to remain private for strategic reasons.
When you buy unlisted shares, youÕre investing in a company before it becomes public. Think of it as getting a seat at the table before the rest of the world even knows a feast is being served.
Why People Are Choosing to Buy Unlisted Shares
LetÕs face itÑbuying listed stocks can be competitive and sometimes overpriced, especially during market booms. ThatÕs why seasoned investors and forward-thinkers are exploring unlisted investments.
Here are a few compelling reasons:
- Early-Mover Advantage
Getting in early has always been a winning strategy. Investors who buy unlisted shares are essentially betting on a companyÕs future potential. If that company goes public or scales rapidly, the returns can be significant. Imagine being an early investor in companies like Flipkart or Nykaa before they hit the mainstreamÑyes, that kind of upside.
- Portfolio Diversification
The market is unpredictable. Diversifying across asset typesÑstocks, bonds, real estate, and now, unlisted sharesÑhelps spread the risk. Adding unlisted equity to your portfolio can be a smart move to protect against market swings.
- Access to Promising Startups and Growth Companies
Many exciting businesses today choose to stay private for longer. These companies are often at the cutting edge of innovation and offer solid growth potential. By choosing to buy unlisted shares, you gain access to these hidden gems long before institutional investors jump in.
- Less Volatility
Since unlisted shares arenÕt traded on a daily basis, theyÕre less prone to the wild swings seen in public markets. This doesnÕt mean theyÕre risk-free, but for investors who prefer a longer-term, stable approach, this can be appealing.
How Can You Buy Unlisted Shares?
Unlike buying stocks on an app or through a broker, investing in unlisted shares takes a bit more effortÑbut itÕs totally doable. Here are some ways to get started:
- Through Investment Platforms: Specialized platforms and fintech startups now offer access to pre-IPO and unlisted company shares. Examples include EquityZen, SharesPost, and in India, UnlistedZone or Planify.
- From Employees or Founders: Sometimes, company insiders may want to sell part of their stake. This route requires solid due diligence and legal clarity, but itÕs a viable path.
- Via Private Equity or Angel Networks: If youÕre connected with venture capital or angel investment groups, you may get early access to share deals in promising startups.
Things to Keep in Mind
While the idea of early access sounds glamorous, it's essential to tread carefully. Here are a few pointers:
- Do Your Homework: Since thereÕs no public data or analyst coverage, youÕll need to dig into company fundamentals on your own.
- Liquidity is Limited: Selling unlisted shares isnÕt as straightforward. You might need to wait for a liquidity event like an IPO or acquisition.
- Regulatory Awareness: Depending on your country, there may be regulations about how much you can invest or who can invest in unlisted equity. Always stay compliant.
Real-Life Example: The Paytm Story
Before Paytm went public in India, many early investors had the chance to buy unlisted shares. When the company finally launched its IPO, those who had entered early saw a significant valuation jumpÑeven if post-IPO performance varied.
This illustrates the power and potential of investing in unlisted companies: it's about getting in before the buzz.
The Bottom Line
Choosing to buy unlisted shares isnÕt just about chasing high returnsÑitÕs about being a forward-thinking investor. While these opportunities come with their own set of risks, they also offer access to innovative, fast-growing companies long before they become household names.
