What is the Grey Market Premium?
Grey Market Premium
A company's stock is bought and sold outside of formal
trading channels on the grey market, also known as the parallel market. It's an
illegal market where shares are traded long before they're available for
Grey markets have been around for a long time, and many
traders and investors believe in them. This is due to the fact that it allows
regular investors and traders to purchase or sell shares even before they are
listed, if they believe the stock will rise or fall in value.
Does it really matter
if it's illegal?
The premium at which IPO shares are exchanged in the grey
market is known as the IPO grey market premium (GMP). According to retail
investors, GMP is a very good determinant of whether an IPO will do well or not.
What is Kostak rate?
The Kostak rate is the price at which you can sell an IPO
application for a predetermined price, regardless of whether you gain
allocation or not.
The GMP determines the degree of interest in an IPO among
investors. Without a doubt, there is no guarantee that the GMP will accurately
predict the listing price. However, it is one of the tools to check before
investing in an IPO.
Many IPOs, such as Zomato and Burger King, have recently had
GMPs of 50-70 percent, and the same kind of gains were seen on listing day.
Where is it located?
Do they have any official Mail ID?
Grey market doesn’t have any of these. Trading is done via
word of mouth. It works in the same way that the 'dabba market' does. There is
no stock exchange. Nothing exists in black and white. Everything is kept under
How does Grey Market work?
Individuals select their own buyers and sellers on a
personal basis. The GMP represents how the IPO might perform on the day of
its public offering. The GMP will be lower if the number of shares up for sale
is less than the number of subscriptions and greater if the opposite way
around. It's essentially a supply-and-demand game.
How do you make money
You can make money in the grey market in two ways: by
purchasing and selling IPO shares before they are posted on the stock exchange,
or by selling your IPO application for a set price.
It permits people to purchase IPO shares even if they miss
the application deadline or desire to purchase more than the permitted number
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