Unlisted shares offer terrific returns, but also carry very high risks; should you invest?
Investors in Tata Technologies were overjoyed when the stock got listed in November 2023. At Rs.1,314, the closing price on listing day was more than 160% above the issue price of Rs.500. Not all investors made a killing though. A few weeks before the IPO opened on 22 November, Tata Technologies shares were trading at around Rs.860 apiece in the unlisted market. The investors who bought these shares at that price saw their investment go up by only 53%.
Even 53% was not theirs for the picking, thanks to a rule that disallows pre-IPO investors from selling their holdings till six months after a stock is listed. The lockin period for Tata Technologies ended last week on 30 May, but the share price is now Rs.1,030, which means the gains are now pared further to less than 20%.
Unlisted stocks are more volatile, less rewarding
Primex 40 has outperformed Nifty 50 in the past three years, but mid-cap and small-cap indices were far ahead
Here’s some cold comfort for the early bird investors in Tata Technologies. They are luckier than those who bought Paytm shares at Rs.3,200-3,400 in September 2021, 6-8 weeks before the company launched its IPO. The first shock for Paytm shareholders came when the company announced the IPO price band, which was lower at Rs.2,080-2,150. Then the stock plunged 27% on listing day, and pre-IPO investors could do nothing but watch in dismay. By the time the six-month lock-in period ended on 18 May 2022, the share price had fallen to Rs.535, almost 85% below the price in the unlisted market, in
