The stock market is a platform for the facilitation of buying and selling securities and stocks of listed companies. However, the stock exchange only avails the trading of those companies which have issued their shares publicly and are listed on the exchanges.
Companies that are not enabled to public their shares are private companies. These companies too own stocks, but they are issued privately to employees and investors through intermediaries or brokers. Since these stocks are private, they are neither listed on the exchanges nor can be traded in the stock market. Companies often have a limited number of shares that are traded on the unlisted stock exchange.
The unlisted stocks are also used by startups and other companies as compensation for their employees due to limited cash flow. The dispensation of unlisted shares to the employees helps to develop a sense of belongingness in the employees for the company. When a company includes the employees as shareholders, they actually own a part of the company, and in turn, they also share the profits as the company grows.
Beware of these things before investing:
The process of buying unlisted shares is as easy as opening a Demat account and depositing the funds one time within a few hours. On the contrary, the unlisted shares trading is a bit quirky and time-consuming. Investing in unlisted shares is not direct and cannot be traded instantly.
The authenticity of the shareholders
Since the unlisted shares are privately held, anyone outside the circle does not have a chance of owing unlisted shares. These are only owned by angel investors, company employees, and venture capitalists. As the over-the-counter market doesn’t have a regulating body, so you are likely to be prey to fraudulent activities.
Liquidity of funds
The buyers of unlisted shares are not easily found. Due to exchanging these shares privately, these shares can’t be redeemed promptly and you will find your funds illiquid. It can open doors to the multiple hassles for investors and more risks for the safety of funds transactions.
Unlisted shares are not valued according to the stock market. The moneymakers of the OTC market control the evaluation of these shares which leads it to either undervaluing or overvaluing of the shares. The investors and promoters of the company run the cycle and their valuation is not very reliable. Due to this reason, the investors have increased chances of earning more revenue.
If you decide to invest large chunks of money in unlisted shares, you must be aware of the financial status of your target company. Investors must have transparency before investing. Although you don’t get to dig out these insights directly, at this point, the trusted relations and networks with the brokers contribute a lot to your secured investment.
Though the ways of investing in unlisted shares are full of potential risks, Unlisted Assets facilitate safe trading for unlisted share buy and they even have a safe escrow based arrangement for the investors. They specialize in trading unlisted shares from authorized companies and avail it for you at reasonable values.