The grey market premium (GPM) is when grey market IPO shares are traded before they are listed on the stock exchange. Simply put, the company’s shares that issued the IPO are bought and sold outside of the stock market.
The GPM predicts how the IPO will perform it goes public. For example, if the business issues an IPO of Rs.100 and the grey market premium is around Rs.20, we can expect the IPO to list at around Rs.120 on listing day. There is no dependability, although, in most situations, the GMP works successfully, and the IPO lists at or around the agreed price.
What is Gey Market IPO?
An IPO grey market is when traders bid and offer a company’s shares on an unauthorized basis. It occurs before issuing shares in an Initial Public Offering (IPO).
There are no rules and restrictions because this is an unofficial market. These transactions are not regulated by market regulators such as India’s Securities and Exchange Board (SEBI). It is also not recognized by the regulator. A small group of people typically manages grey markets. All transactions are based on mutual trust.
Is Grey Market Safe?
It is dependent on the broker or trader, and I believe that it is risky. You will be trading at your own risk if you trade in the grey market. There may be higher-than-usual fluctuations, so proceed with caution. As suggested, for listing gain purposes, simply refer to the IPO GMP. Be cautious and only trade in the primary market after listing.
What is Kostak Rate?
One investor pays the Kostak rate to the seller of an IPO application before the IPO’s listing. The Kostak rates react in the same way that the grey market does. One can fix their profit by buying and selling their entire IPO application on Kostak rates outside of the market. Whether an investor receives an IPO allotment or not, the buyer must pay the Kostak rates for the IPO.
For example, if a person submitted five applications for one IPO and sold them for Rs 1000 each, they have achieved an IPO profit of Rs 75000. Even if he gets the allocation in two applications, his profit will be Rs 5,000. Now, if he sells the stock and makes a profit of roughly Rs 10,000, they must distribute the remaining profit of Rs 75,000 to the investor who purchased the application. It is the safest approach to sell your app on the IPO grey market.
What is LIC IPO?
As we all know, the LIC IPO can be beneficial for you with an issue price ranging from Rs 2000/- to Rs 2100/-. According to brokers, the GMP for the LIC IPO is very high. If you locate a good enough LIC IPO GMP, you can transfer your shares to others. Higher LIC IPO GMP means greater profit for those who receive LIC IPO allocation. Furthermore, the transaction for obtaining GMP price is non-official to conduct it following trading rules. As a result, according to our calculations, the LIC IPO GMP 2022 will be highly high.
How to Calculate GMP?
The IPO GMP, also known as the grey market premium, is a price transacted on the black market before the IPO listing process. The calculation is based on the company’s performance, demand in the grey market, and subscription possibility. Assume that the IPO price is fixed at 200 and the grey market rate is 100, implying that the IPO may list at 300 (200+100). It is still an assumption, and the actual listing price may differ from the grey market pricing.
Price Band for LIC IPO Grey Market Premium
- The Life Insurance Company will issue its first public offering (IPO) on10th March 2022, as per its estimated timeframe.
- After 10th march, you can begin applying for LIC IPO Subscription.
- After listing, the LIC IPO price for each share could range between Rs 1500/- and Rs 3200/-
- The issue price of the LIC IPO could range between Rs 2000/- and Rs 2100/-.
- Following the IPO, the share lot size will get revealed.
- Each share in the LIC IPO has a face value of Rs 10 per share.
- The minimum investment for the LIC IPO 2022 will also get revealed on its announcement day.