Is it safe to buy Reliance Retail unlisted shares?

The purchase of unlisted stocks is still a doubtful decision-making process for many investors. Safety is the biggest reason, and the lack of guarantee from any authorized institution makes the decision more challenging. 

The Reliance Retail Share Price is reasonable to buy, but they are not listed in the formal stock market yet. It makes the decision-making more challenging for the investors, and they will be stuck between these questions: Should they buy the shares now or buy it after it gets listed in the market?

Recently, the curiosity has gone high among investors to buy unlisted shares. This is because of the high returns, but the price has also increased for these shares. Many investors are not sure about trading the unlisted shares as they are a bit risky too. 

However, still, these shares are frequently purchased and sold every day in the share market. One such is the Reliance Retail Share, which is the buzzword in the market.

But, what are unlisted shares?

Any financial instrument or security available for trade on over-the-counter markets is referred to as unlisted shares or over-the-counter (OTC) securities.

Unlisted businesses are typically not traded on any formal share market. This is because fresh or new companies/startups cannot or do not want to comply with specific prerequisites such as listing charges, market capitalization, etc.

Considering the recent Reliance Retail Share Price, it is the right time to buy these shares. 

How can you purchase unlisted shares?

Unlisted shares can be traded on the OTC market, but they are far less liquid than their listed counterparts. These shares are not traded on any exchange and are transferred through your broker’s NSDL/CDSL. 

Before an IPO, companies may issue shares to promoters, employees, or through a private placement, which may end up in the pre-IPO market. When the promoter commits to private placements or when employees dilute stock options, these shares become tradable.

Investing in pre-IPO startups allows investors to participate in a company’s growth before it is listed. And this provides a better opportunity for investors who may not be allocated shares during the IPO subscription period when the offer opens to the public in the case of high-demand issues. Furthermore, the volatility of share prices is relatively low.

Previously, such shares could only be purchased by institutional investors and funds, but they are now available to retail investors. Several platforms and intermediaries buy shares from employees (ESOP) and existing investors and resell them to new investors. 

However, because these are off-market transactions between the buyer and seller, choosing a reputable, established intermediary or platform is critical when purchasing unlisted shares is vital. The one-year lock-in period for shares after they are listed is an important consideration.

Now that you understand the meaning of unlisted shares and the method to buy and sell them, what is its endgame? Should you trade with these shares? The risks are as much as investing in startups and new ventures, and the value of these shares is always dependent on the business’s success.

Before buying these shares, you must consider the following points.

  • A financial instrument or security issued by a firm that doesn’t trade on a stock exchange is known as an unlisted share.
  • Unlisted stocks include penny stocks, common stocks, government securities, corporate bonds, and derivative products.
  • Investing in new ventures and intermediaries, buying ESOPs directly from promoters or employees, or buying unlisted shares through AIF and PMS schemes are all investment options in India’s top unlisted companies.   
  • Dividend omission, illiquidity, capital loss, and dilution are all risks.

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