How to Sell IPO In Grey Market

Have you ever thought of selling your IPO shares in the grey market but didn’t know how to sell IPO in the grey market? This can be a common dilemma for a lot of traders as they know that the grey market might give them profits but don’t know the process to grab the opportunity.

The first question is, what is IPO grey market?

It is an unofficial market where you can buy and sell IPO shares as well as IPO applications. The grey market is activated as soon as the price band of an IPO is announced. This goes on till the IPO listing.

Grey Market Premium is the amount involved in the grey market. But here is the question, why GMP is important in IPO?

The GMP of an IPO tells a lot about the listing price of the IPO.

So, the grey market plays an important role in the whole functioning of the IPO. So, let us now have a look at how to sell IPO in the grey market.

How To Sell IPO Shares in Grey Market

Here, most of the investors are aware of how to sell IPO shares in the secondary market but selling it in the Grey Market is still challenging for many.

As already known that IPO brings in an opportunity for investors to invest in IPO to earn profit not only from the listing gains but also from the premium in the grey market.

Wondering How?

By selling IPO shares in the grey market. Yes, apart from selling IPO on listing day you can sell it before by in the grey market.

The buyer in the Grey Market buys the application by paying the premium amount decided on the basis of the demand of the particular IPO.

Since the grey market is an unofficial platform, there is no broker involved in the buying and selling. Therefore, if an individual wants to sell IPO in the grey market, they have to look for a local dealer.

However, the individual must have a Demat account to apply for an IPO and then to sell off the shares in the grey market.

The person who applies for an IPO gets into the contract of selling the IPO shares before allotment to the buyer with the help of the local dealer.

The buyer who is looking forward to earning money through listing gains, in turn, pay the Grey Market Premium to the seller.

Now here comes the question of how do the buyer and seller of the Grey Market earn money?

Here as already discussed, the seller earns money by getting the premium, on the other hand, the buyer gets the shares and due profit if the IPO gets allotted to the seller.

Thus, the grey market makes it easier for the buyer to earn profit through listing gains, while the seller makes extra money by getting a premium.

And in cases where the shares are not allotted to the seller, he still gets the premium/GMP because that is a non-refundable payment.

How To Sell IPO Application in Grey Market

Just like selling the IPO shares, an individual can sell an entire IPO application in the grey market as well. The process of the same is defined below.

• An individual who is eligible to apply for IPO online in India will apply for it in a similar way.
• Then the IPO application is put up for sale in the grey market by a local dealer.
• On the basis of the supply and demand of the IPO, the GMP is calculated. You can check the detailed review on how to calculate GMP of IPO to prevent yourself from paying much.
• Any interested buyer who thinks that the IPO application deserves more capital buys the IPO application from the seller.
• Now, if the application gets allotted to the seller in the first place, they have to transfer all the shares to the buyer.
• The seller is not entitled to keep the profit after the allotment of the shares. In case of a loss or lower listing, the loss is also borne by the buyer.
• If the IPO is not allotted to the seller, they still get the benefit of the GMP that they have received.

In this way, the selling of IPO applications works in the grey market. So now, if the IPO application is sold for a good GMP in the market, it indicates that the buyers think the IPO is undervalued and are willing to pay a higher price.

However, it is not every time that a higher GMP will indicate a good listing. Therefore, an investor should keep all the factors in mind to ensure that they get the maximum out of the IPO.

Conclusion

A lot of people who want to take advantage of the grey market of IPO often wonder how to sell IPO in the grey market. You can see now that you need only a valid demat account and a valid application if you want to earn from the grey market.

This is done through a local dealer and is not regulated by SEBI or any other regulatory. So while it is good to check the GMP of an IPO before investing in an IPO, it is crucial to consider all the other factors as well.

If you want to sell IPO in the grey market, open a demat account today!