What is GMP in IPO or IPO GMP is such an aspect of the share market that attracts every investor very much. Since the Corona period, many people have lost their jobs in their country and due to this, the attention of the people has been attracted towards the share market, if we look from the year 2020 to the year 2021, then almost many companies have come in the market with their IPO.
Some have made investors rich and some new investors are disappointed. If we talk about last August month, in this about 30 companies have submitted their documents to market regulator SEBI to bring IPO, then from this, we can guess that In the coming days, there is going to be a lot of excitement in the primary market of the stock market.
Whenever a new IPO is going to be listed in the stock market, IPO Grey Market Premium or IPO GMP remains a hot topic of every IPO, many people want to invest in IPO based on the GMP rate of every IPO, which is Investors’ money is sunk and there is a lot of demand in the grey market premium of many IPOs. Which also doubles the money of the investors. In the past, there have been many IPOs that have doubled the money on the day of listing gain to the investors like the recently listed IPOs – Zomato, Clean Science, Tattva Chitan Pharma, GR Infra project, etc.
But many people do not know what is GMP in IPO, what is called Grey market premium, or What is IPO grey market. So let’s know about IPO GMP.
What is IPO Grey Market?
IPO Grey Market is an unofficial market, In which IPO or new shares of a company are traded unofficially, the IPO Grey Market is not under any government or any company, there is no legal proof of this, it is only bought by some dealers in the market where the company’s shares are traded. Shares or IPOs are bought and sold before they appear on the stock exchange. In which trading usually starts shortly before the issue of new shares of a company i.e. IPO. That is, stock trading in this market starts before the shares of a company officially start trading.
What is GMP in IPO?
Grey Market Premium is the stock price that trades unofficially in the grey market before it is listed on the market, as an example. Let’s say stock AA company is coming with its IPO and its price company fixes the issue price of Rs.300 And if the shares of the company’s IPO are being traded at Rs. 200 in the grey market, then it means the issue price of the company’s shares is 300 + 200 grey market premium.
If it happens that a retail investor through IPO of that company if he gets share allotment If it goes, then it can make a good profit on the day the listing day because the shares of the company will be listed at the rate of Rs 500, due to which the investor will get a profit of Rs 200 per share.
Is GMP Legal?
There is no official proof of this yet. The grey market is an unofficial market. Because of this, there are no rules and regulations for this. The grey market is not tracked by anyone in an official way. Since there are no rules, SEBI does not take any responsibility for such transactions. Grey market operations are done by some people with mutual consent. Thus the grey market is not illegal but due to no regulation, no one has any control over it.
What is a negative grey market premium?
An IPO can have a positive grey market premium as well as a negative GMP. If the price of one share of an IPO is ₹ 500 and the trend of that IPO in the market is falling. Because of this, sellers in the grey market are selling more of that IPO. In such a situation, you will get these shares for less than the issue price in the grey market. This means the shares are selling at a price lower than the issue price, which means that the shares are trading at a premium negative discount rate.
GMP Risk Factors?
The biggest risk of the grey market is that it has no regulator. All trades in the grey market are oral and are not written anywhere. There is no option to go anywhere later if any party reneged on its promise. In the absence of a regulator, even SEBI cannot do anything in these matters. Grey market premiums are not reliable. Even if a dealer tells you IPO grey market premium or a website tells GMP, there is always a question on the credibility of all these.
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