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Unlisted shares are the shares that are not listed on any stock exchange. The shares floating in the market comes generally from the shares allotted to the employees via ESOP or sometimes given to the dealers of the company. These shares may be physical or demat because they might be issued even 50 years ago.
Why are unlisted shares safer than listed shares?
Listed Shares are stocks that can be traded through an exchange. When a private company decides to go public and issue its shares, it needs to choose an exchange in which it will be listed. Listed shares include a minimum stockholder’s equity, a minimum share price, and a minimum number of shareholders.
On the other hand, unlisted shares are shares that are not traded on an exchange but through an over the counter (OTC) market. Unlisted shares are not listed on any stock exchange and are thus not traded publicly. Due to this, most of the time, unlisted shares are not liquid.
The various benefits of investing in unlisted shares over listed shares are as follows:
- High-Value Investments – since unlisted shares are not liquid, they are mostly undervalued. Hence, good returns can be expected on these investments.
- High Growth Investments – companies that have unlisted shares are usually small scale and are yet to grow and make use of their funds and capital. Hence, buying a small company’s unlisted shares leads to good returns when the company soars in the future.
- Peace of Mind – the value of unlisted shares remains steadier than that of listed shares. So, investors don’t have to worry about major fluctuations in stock prices.
- Diversification of Risk – unlisted shares offers risk diversity for investors since they are not liquid.
- They are also preferred since investors can expect huge returns when the particular unlisted share gets listed in the company and market.
Even though both listed and unlisted shares have their own sets of risks involved, unlisted shares are cheaper and have less fluctuation in the stock market. Hence, investing in unlisted shares becomes a smarter option due to diversification and the opportunity for growth.