What Happens to Unlisted Shares After an IPO? A Complete Guide
Do you hold unlisted shares and are not sure what exactly is going to happen after the IPO? Many investors or traders are having similar doubts, as around 300 ventures are already in the process of raising 16.55 billion dollars in 2025. As mentioned in another article on Financial Express, the average listing gain has been only around 8.41% in 2025.
Let’s try to dig deep and understand how exactly your unlisted shares convert and what you should expect from them.
What Happens On Listing Day
All your unlisted shareholdings get automatically converted into listed shares as the IPO goes listed. You’ll get a new ISIN with a live market price as the trading begins.
Lock-In Rules For Each Shareholder Type
SEBI puts a limit on the number of shares an investor can sell on the first day of the IPO. These rules are to ensure that the trading remains free from any manipulation or selling pressure.
While the promoters have the longest lock-in period, anchor investors have the shortest one. Early investors can act as per the lock-in timeline finalised during the IPO. Further, ESOP holders are only allowed to sell vested shares.
Specifically, the promoters’ lock-in period is 18 months. The same is 30 days to 90 days for anchors. For AIF and VC investors, the lock-in period will be similar to IPO documents.
Changes In Recent IPO Regulations That Affect You
Recent changes in the lock-in period for shareholders make the IPO market smoother and transparent. While some stock categories now have shorter lock-in periods. These recent regulatory updates set new guidelines for IPO-ready companies and early investors.
What Happens To Unlisted Shares After IPO
As the company gets listed, all the unlisted shares automatically get a fresh ISIN. These are displayed in the demat account with the real-time market price.
Although your share quantity doesn’t change, your valuation after the company’s IPO listing will comply with the market price on the listing day.
Invest In The Grey Market Of Unlisted Shares
Usually, people rely on private deals, small brokers, and verified platforms to buy unlisted shares for IPO. Such a share purchase happens before the venture goes public on the basis of demand and negotiation value.
Grey market prices can have sudden ups and downs based on the company’s performance, financial updates, and IPO pricing.
Where Are Unlisted Shares Traded
Unlisted shares are purchased and sold directly between people, with prices being finalised through negotiation. Unlike other stocks, these are not traded via a stock exchange. Both buyers and sellers need to rely on the verified platforms or networks.
These trades happen via counter transactions through intermediaries. These channels ensure automatic ownership verification and transfer documentation.
Is It Illegal To Invest In Unlisted Shares Through Platforms In India
With proper KYC and documentation rules, it is fully legal to purchase the unlisted shares. The platforms offering these shares must comply with fair and safe guidelines.
It is essential to have a legal off-market transfer request along with payment trail tracking for all transactions. It will help to maintain compliance and safeguard investors.
Risks You Should Keep In Check
There can be inaccurate valuation and low liquidity because of the low availability of buyers. There are also limits in terms of public information availability.
Further, you can also face longer waiting times before exit, and lock-in regulations post-IPO can delay the sale. There are certain factors creating uncertainty for unlisted shareholders, such as regulation changes, business performance concerns, and risk of price manipulations.
SEBI’s Announcement On The Launch Of A Pre-IPO Trading Platform
SEBI is bringing a dedicated platform for pre-IPO trading. It is designed to offer more transparency, visibility, and organised access for unlisted shares. This platform will be a great help for investors to verify trades, check prices, and purchase stocks safely.
This platform will also benefit investors through relevant verification and tracking progress. It will allow investors to check seller identity, track real-time prices, and regulate share transfers.
How Can You Invest In Unlisted Shares
There are various sources to buy unlisted shares of IPO-ready companies. Some of these are authorised intermediaries, verified platforms, or direct share transfers. Make sure to verify the platform or source for safe investing.
The shares must be transferred to your demat account with proper KYC and documentation in place.
How Are Unlisted Shares Taxed
Taxation regulations play a role at the time of buying and selling shares. The holding period of the unlisted stock gets counted from the day of acquisition. The gains from the stocks will be completely dependent on this timeline.
In case you hold unlisted shares for 2 years or less, the taxation will be on short-term capital gains under your income slab. On the other hand, if the unlisted shares are there for more than 2 years, the tax will be on long-term gains at 20% with indexation benefits. The tax rules for ESOPs are separate for the exercise and sale.
Conclusion
Hence, unlisted shares can be thrilling for investors while the company is getting ready for IPO listing. However, it is essential to be aware of the long-term day, lock-in working, and other associated aspects. Hopefully, the above insightful article has cleared all your doubts and avoided common mistakes.
For More Information: Download Stockyaari App Now
Standard warning: “Investment in securities market are subject to market risks. Read all the related documents carefully before investing.” Disclaimers: a. “Registration granted by SEBI, enlistment as RA with Exchange and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.” b. “The securities quoted are for illustration only and are not recommendatory.”
This analysis is for informational purposes only. Please consult a SEBI-registered financial advisor before investing.
– Chandan Pathak
Equity Research Analyst, StockYaari