Introduction

As IPOs continue to attract strong investor interest, many people receive WhatsApp messages, Telegram alerts, or broker calls offering an opportunity to buy unlisted shares before the company goes public. These messages often promise huge listing gains and create a fear of missing out (FOMO).

While investing in unlisted shares can be rewarding in some cases, blindly trusting such offers can prove to be an expensive mistake. Since unlisted shares are traded privately and not on a recognised stock exchange, their prices may not always reflect the company’s fair valuation.

Why Are Unlisted Shares Risky?

Unlike listed shares, unlisted shares are bought and sold through private transactions. There is no transparent exchange-based price discovery mechanism, making it difficult for retail investors to determine whether the price being quoted is justified.

As a result, investors may unknowingly pay a hefty premium over the company’s actual valuation.

A Recent Example: SBI Funds Management IPO

A recent example is SBI Funds Management Ltd.

Before the IPO, several brokers and WhatsApp groups were offering the company’s unlisted shares at around ₹820 per share, promoting them as an opportunity to earn attractive listing gains.

However, when the company announced its IPO, the price band was fixed at ₹545–₹574 per share. Investors who had purchased the shares at around ₹820 were suddenly sitting on a notional loss of nearly 30%, as they had paid a much higher price than the IPO valuation.

This clearly shows that a high price in the unlisted market does not necessarily mean that the company’s IPO will be priced at the same level.

Why Does This Happen?

The price of unlisted shares is influenced by demand, supply, investor sentiment, and negotiations between private buyers and sellers. During periods of high IPO excitement, prices may rise sharply due to speculation rather than the company’s actual fundamentals.

Since there is no regulated exchange to ensure transparent pricing, investors may end up paying far more than what the company is ultimately valued at during the IPO.

Red Flags You Should Never Ignore

Before buying any unlisted share, be cautious if you receive messages that:

·       Promise guaranteed listing gains.

·       Create urgency by claiming “Limited Shares Available.”

·       Pressure you to invest immediately.

·       Focus only on profits while ignoring valuation.

·       Do not provide credible financial analysis or valuation support.

Things to Check Before Investing

Before investing in any unlisted company, ask yourself:

·       Is the quoted price justified?

·       Have you reviewed the company’s financial statements?

·       How does its valuation compare with similar listed companies?

·       Are you investing based on research or simply because of market hype?

If you cannot confidently answer these questions, it may be wiser to wait until the IPO opens.

Final Thoughts

Investing in unlisted shares can create wealth—but only when backed by proper research and reasonable valuation.

The recent SBI Funds Management IPO reminds investors that paying a high premium in the unlisted market does not guarantee higher IPO returns. Instead of making investment decisions based on WhatsApp forwards, broker messages, or social media hype, investors should focus on the company’s fundamentals, valuation, and long-term growth potential.

Remember, in investing, missing an opportunity is far better than overpaying for one.