The "invisible" stock market
Unlisted shares, and the grey market
Imagine there’s a company you love. You’re their loyal customer and would love to invest in it.
But when you start researching, you realise that the company is not even listed.
So what do you do?
Well, you turn to something called the “Grey market”.
Also known as the “Pre-IPO market” or the “Unlisted share market”, this is an ecosystem where you can buy shares of companies that are not yet listed on the stock exchange.
No, it’s not a physical market. It’s just the term used for the ecosystem of brokers, websites and other entities that enable investments in these unlisted shares.
Don’t worry, in the next 5 minutes, you’ll understand all there is to know about buying unlisted shares :)
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So what is this grey market? And is it illegal?
Well, the grey market is a parallel, largely unregulated market where shares are bought and sold privately through brokers and specialised platforms.
There’s no live price screen, no daily volume data, and no regulator overseeing price discovery.
No, it’s not illegal. It’s just not regulated by SEBI or any other regulator.
And because it’s not regulated, it’s called the “grey” market.
Okay, how is the pricing decided then?
Unlike listed stocks, unlisted shares don’t have a single “market price”.
Instead, pricing is done by private negotiations between buyers and sellers, usually routed through brokers.
A few things influence these prices:
Who is selling the shares (employee, early investor, VC)
How urgently they want liquidity
How scarce the shares are
How close the company is to an IPO
And the overall market sentiment at that time
This is why the same company’s unlisted shares can trade at different prices across different platforms simultaneously.
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We keep hearing about “GMP” in the grey market. What is it?
This term usually comes up before a company goes for IPO.
GMP is the extra price investors are willing to pay for a share before the IPO, over and above the expected IPO issue price.
For example, if a company is expected to issue shares at ₹100 during its IPO, and the same share trades at ₹140 in the grey market, the GMP is ₹40.
In simple terms, GMP reflects what buyers expect the listing price to be, not what the company is actually worth.
Essentially, the GMP tells you
How strong investor demand is
How optimistic the market feels about the IPO
But, it does NOT tell you:
Whether the valuation makes sense
Whether the company’s fundamentals justify the price
Whether the stock will actually list at that level
Essentially, GMP is a sentiment indicator, not a valuation tool.
A common misconception investors have
When it comes to Pre-IPO shares, most people think “if I invest before the IPO, I get it at a cheaper price.”
No. That’s not how it works.
The valuation principles stay the same, whether you invest before or after the IPO. In fact, there is more transparency in valuation after the IPO, because listed companies have more things to disclose.
So you might get an unlisted share at a good price. But it’s not just because it’s unlisted. Make sure you’re very clear about this before you start investing.
What kind of companies can you invest in?
Basically, all kinds.
You can invest in startups, mid-sized companies or large corporations. All of them are available in the Pre-IPO market.
Side Note: If you’re keen on investing in startups, LVX Ventures is doing a webinar on startup investing on 13th January. Check it out if you want to know about ticket sizes, valuations and how to find the right companies.
Now let’s talk about risks..
Well, as with any investment, unlisted shares come with their fair share of risks:
It’s an unregulated space, so there’s no SEBI-backed protection if something goes wrong
Selling is slow and uncertain — can also take weeks or months to find a buyer in case of large volumes
Financial disclosures are limited
SEBI mandates that if a company does an IPO and you have purchased its shares in the Pre-IPO market, you can’t sell it for a period of 6 months from the IPO date
This market isn’t illegal for investors, but it operates in a space where caution matters more than confidence.
So what’s the verdict? Should you invest?
Well, while unlisted shares offer early access to companies before they go public, they are not shortcuts to easy money.
They require patience, research, and the ability to sit with uncertainty. If you’re okay doing that, or you want to experiment with a small amount of money, go ahead. Just make sure you know the risks you’re signing up for :)
If you want to understand this market properly before putting money into it, we’ve broken everything down in detail in our latest blog.