Pre-IPOs (Initial Public Offering) is the placements secured by the investors before the launch of a company. During the pre-IPO placements, companies sell their securities to the public, retailers, and small investment organizations. Once the pre-IPO shares go public, the investors cannot sell their shares in the open market for at least one year.
The pre-IPO placement drive is conducted to ensure the fixation of shares pricing of companies once they get listed. Many stakeholders do not uphold their shares after the IPO which brings volatility in the prices. The more selling of shares, the more will be the reduction in company valuation. To mitigate this risk, a one-year lock period policy is installed.
For raising more equity capital, the investment bankers approach financial institutions for pre-IPO stocks to buy and negotiate a price to hold long-term investors.
The price negotiation helps the investors to stay along with the risks and benefits of the respective company. Otherwise, the investors can take early exit and companies may lack in the funds’ flow.
Ways to buy pre-IPO stock:
Intermediaries and start-ups
Some start-ups are specially designed to allow unlisted shares’ investment through their Demat account. Moreover, intermediaries have a direct network in the unlisted companies. They offer pre-IPO stocks to interested buyers. .
Employees get an ESOP (Employee stock ownership plan) at the beginning of their recruitment. In this way, they hold a small section of equity ownership. You can connect with a broker who can regularly inform you of the list of unlisted shares for sale and you can buy the shares from that employee through your broker.
The promoters of the unlisted company also have an equity share and sometimes, they place it for sale privately with banks and wealth managers, and the process is called private placement. For a buyer, private placement requires a strong network in the company.
PMS (Portfolio Management Services), or AIF (Alternative Investment Funds)
PMS or AIF is a great way to get unlisted shares. The investors of unlisted shares are usually large finance supporters and institutions that supervise PMS or AIF schemes. Such investors make huge profits when the company is listed on the stock exchange.
The pre-IPO pricing is pre-determined; hence its value increases after the IPO launch and institutions are benefitted.
It is not necessary that the financial managers will only benefit from the investments, the share prices might fall and their holdings can be at stake which results in huge capital loss.
Equity funds raising platforms
A lot of crowdfunding platforms help you to invest in the equity shares of the unlisted companies. Angel investors are eligible to buy unlisted shares from some crowdfunding platforms by investing in high-worth shares.
If you are looking for a reliable platform to help you in the transaction of pre-IPO shares, Unlisted Assets is the one. Through this platform, you can buy sell pre-IPO stock. Our professional advisors direct you to the right path of unlisted trading.