What is an Unlisted stock?
An unlisted stock refers to shares in a private limited or limited company (this is not listed on the stock markets). Unlisted stocks are bought and sold informally by market makers, brokers, HNIs and dealers over the counter or in private transactions. Our mission is to formalize this asset class.
Why are these companies not listed?
Many reasons. They either cannot or simply do not wish to comply with the listing requirements. In all honesty, listing your company is an arduous task, in terms of compliance and other regulations. More and more companies prefer to raise money privately so that they can focus on their long term vision rather than try to meet the market’s quarterly expectations.
What are the risks?
Investments in itself carry an innate risk. There is always a possibility of losing money, but that is the chance we are all willing to take in return for non-linear future gains. The normal risks associated with investing exist with unlisted securities too.
Another kind of risk specific to unlisted securities is a lack of liquidity. The lack of an exchange means that it takes a significant amount to time to sell your investments. Although there is a vibrant ecosystem of brokers, market makers and dealers of unlisted securities, it can take anywhere between a few days to a few weeks. In the future, we plan to solve this by introducing a selling platform as well.
How do companies raise capital if not from an IPO?
Historically, the idea behind listing your company is to raise capital. Thankfully with all developments that have knocked on our doors in recent years, companies are been able to raise finance from alternative sources like venture capital, private equity, and innovative forms of debt. An IPO comes with big financial responsibilities, triggered by the huge costs of regulatory compliance. It is believed that the fastest periods of growth happen in the pre-IPO period. There was an interesting research performed by Cambridge Associates recently, suggesting that private equity investors outperform public markets over the long term.
What should you keep in mind before investing in the unlisted market?
A bunch of things! Yes, trust is hard, but not impossible. One big question everyone asks is how are these companies being valued. Unlike the listed market, the holdings are not updated every day based on a prevailing share price. The valuations are triggered by a new round of fundraising. Trigger events result in revaluation. It could be more expensive. Like any purchase, compare the net of all fees and costs before you make a decision to invest through a broker or sub-broker.
How can you sell?
Remember, selling is the tough part. You need to do your research. There are brokers in the market who would help you with selling them. But in all honesty, you will need to identify a buyer. It’s not impossible. It’s just tougher, and if you are okay with some amount of tough, you can take this on. These securities are not liquid, so before you invest in any, make sure you are aware of how the company is performing, how the industry is performing and what the competitive strategies are like.
How does the process work with Minance?
It’s simple, really. We need you to fill a form with a few necessary details. Once you select the stock and make the payment via the payment gateway, you will receive the invoice for the order. Then, a member of our team will get in touch with you to confirm your demat account details. Once that is done all you need to do is sit back and relax and the shares will be credited into your account within 7 business days
What are the securities we are offering?
This will be subject to change over time. Our team performs in-depth research of all companies to shortlist inventible ones that we think you should have in your portfolio. These can be bought directly from the investments tab of this website
Reach out to our team if you have any other questions that need to be answered. As you know, we are a budding young team, with aspirations quite avant-garde in nature. We are excited about unlisted equity and where it will take the Indian economy, and it’ll be super to have you on board with us.