The stock exchange is the market in which shares, and securities of the companies are bought and sold. A company can raise its capital by selling its shares in the market. Raising money will help the companies to expand their business. The investors who purchase the share can buy and sell them among themselves. The unlisted stock exchange is done over the counter. They do not trade publicly because they do not meet the requirements.
Features of unlisted stock exchange
- Trade: The shares of unlisted companies do not trade on the official stock exchange. There is a different market for their trade.
- Demat account: The unlisted stocks are transferred to the Demat account. A person can check the status of the unlisted share via the Depository Participant account because these shares are displayed as a face value in DP’s history.
- Price: Unlisted stocks are the game of supply and demand. The share rate is fixed by mutual consent between the trader and the customer.
- Liquidity: The unlisted market has a liquidity issue as investors do not liquidate their status.
The unlisted stock trade is independent, and a person can easily invest in them.
Pros of investing in the unlisted stock
- The unlisted stocks are concerned with small businesses. Small businesses grow fast because they have a lower base. Investing in these companies can be very beneficial for the investor.
- In unlisted shares, the price does not fluctuate much. A person should not be a worry after investing in the unlisted shares.
- Some of the unlisted shares are overvalued and undervalued. A person shod have good knowledge of it and buy the share when they are undervalued and should sell them at a significant rate.
Cons of investing in the unlisted stock
- They do not provide liquidity. The person can not get cash in an emergency because the unlisted stock is difficult to convert into currency.
- A person will have to pay higher taxes after investing in the unlisted stock. The listed stock charges lower taxes.
- They lack transparency as they cannot provide the status to their investors.
Types of Unlisted Stock
- The government securities
- The Penny stocks
- The Corporate bonds
- Swaps, etc.
How to invest in unlisted companies
- A person should always invest in small businesses or start-ups. The amount will directly come to the Demat account.
- One way to buy the shares of the unlisted companies is through brokers as they help the investors connect them with the employee of the company trade the shares at a fixed price.
- A person can approach the bank, manager, or broker who can help them learn the stock prices.
The unlisted securities market does not trade formally or publicly on the stock market. A person can invest in the unlisted stocks by investing in the startups because their prices do not fluctuate, and the stores will directly go to the Demat account. A person can also buy unlisted stocks or securities through brokers and banks or directly through the organisation’s employees.
