Latest IPO Grey Market Premium – IPO GMP Rates

Want to know about the Grey Market of different IPOs?

Let me first inform you what is IPO Grey Market Premium in the business world.

Grey Market is a market where trades are made offline and we can say it is just under-the-table trades.

The grey market is not regulated by any government body or any officials and hence there are no such rules & regulations made for the market. Whatever trades are made in the grey market are just done between two individuals by their mutual understanding.

Any company which is entering in the Stock Market mostly go through an IPO (Initial Public Offer) in which it offers the company’s share to the public and other bodies. Whatever the company declares the price for its IPO and the date of commencing ipo, the grey market gets activated. Based on the company’s share offer price, the estimated price of the listing starts circulating, which may be a discount price or maybe a profitable price which is called Grey Market Premium (GMP). The grey market premium is not monitored by any regulations. And the estimated premium may have many fluctuations in the price. The GMP of the shares gets many ups & downs till the stock lists in the official share market.

It is assumed that any person who trades in the grey market has such knowledge that he or she can not go to any authorities if he/she finds any problem like mispricing or another person doing a fraudulent activity with him/her.

Calculation of The Grey Market Trades

Suppose any company launches ipo and declares a price band in which we have the option to apply in IPO between the bottom to the upper price declared by the company.

Now the grey market ipo premiums of any IPO are traded assuming the upper offer price of any IPO is the final price. This means if a company announced a price range from Rs.95 to Rs.100 for its IPO, the grey market premiums are traded being counted as Rs.100 the base price. Suppose Grey Market Premium for that IPO is being traded at around Rs.7, that means The buyer in this situation is ready to pay Rs.7 extra above the declared upper price by the company. That is how an Investor in the IPO can book his position in a secure Mode. I mean if an IPO investor sells his application to the Premium buyer, he books his profit by Rs.7 in that IPO. Now, the premium buyer will get his profit or makes a loss on the listing day of that IPO. The premium buyer will get a profit only above the listing price of Rs.107 or will make a loss accordingly.

The seller and Buyer in the Grey Market trades of any IPOs do transactions in cash. Here any brokerage or transaction charges that have been charged while making real trades in stock markets are only carried by only the Grey Market Premium seller. Profit & Loss in the Grey market trades is calculated neglecting all the charges or brokerages that are levied on the Grey Market premium Seller.

Here the grey market trades are being made in different ways like on Premium or application or Subject to Allotment mode. In all these different kinds of Grey Market prices the trades are being made by mutual understanding of two individuals. This means a person wants to sell his application in Subject to allotment way, the profit or loss will only be calculated if the applicant will get an allotment of applied shares.

In another way, trades are being made on just applying for IPO which is called Application Price. If you just apply in the Ipo and sell the application, the application seller will get such an amount whether he will get the allotment of shares or not. Here is the Application seller gets an allotment of shares, the buyer of the application will be liable for any profit or loss whichever happens in the real market.

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