Difference Between Pre-IPO, Unlisted & Delisted Shares

Due to growing awareness and equity investment acumen amongst investors, IPOs have been receiving a lot of attention and are getting subscribed heavily. However, it has of late become very difficult to get allotment of desired number of shares in an IPO. In such a scenario, the Pre-IPO investment opportunity has been gaining attention. At this juncture, it is important to understand the difference between Pre IPO shares, Unlisted shares and Delisted shares. 

The otherwise muted 2020 was extraordinary for IPOs in India, with 14 public issues raising nearly INR 27,000 crore. Due to growing awareness and equity investment acumen amongst investors, IPOs have been receiving a lot of attention and are getting subscribed heavily. However, it has of late become very difficult to get allotment of desired number of shares in an IPO. In such a scenario, the Pre-IPO investment opportunity has been gaining attention. One can purchase shares well below the IPO price before it actually gets listed on a recognized stock exchange to derive maximum benefit. The only catch in Pre-IPO investment is that there is a lock-in period of one year i.e. to say that one cannot sell shares before one year from the date of listing. 

At this juncture, it is important to understand the difference between Pre IPO shares, Unlisted shares and Delisted shares. 

Pre IPO Shares

Every business organization, big or small, new or established, structured as a way to survive, exist and grow. Long term funds can be broadly raised via either Debt or Equity. Debt represents borrowed capital whereas Equity represents ownership capital. When funds are raised via Equity, the investors pool in capital with an expectation of extraordinary return on their investment. The company usually raises equity capital through private sources initially to subsequently provide an exit option to its investors through going public via announcing its IPO. Before the formal launch of such IPOs, the companies usually arrange Pre-IPO investment option for the investors.

Unlisted Shares

Unlisted shares simply mean such shares which are not listed on recognized stock exchanges like NSE or BSE and also don’t have any nearby plans to announce an IPO. There are a lot of companies in the unlisted space which give very good dividends to their investors. However, liquidity is an issue in case of unlisted shares as not enough buyers and sellers may always be available for unlisted companies. 

Delisted Shares

The shares such companies are delisted from national stock exchanges like NSE or BSE and are currently not available for trading. Delisting may be because of non adherence of adequate disclosures as per regulatory guidelines or may be a pure management call to delist the company.

It is far better to buy a wonderful company at a fair price than a fair company at a wonderful price.