IPO GMP
(IPO Grey Market Premium)

IPOGMP (IPO Grey Market Premium) refers to the difference between the issue price and its estimated listing price in the grey market. Before an IPO officially hits the stock exchanges for public trading, investors engage in unofficial trading of the IPO shares during a period called a grey market or unofficial market trading. The grey market is an over-the-counter market where the shares buying and selling happen without the involvement of the stock exchanges.

The grey market premium is the difference between the price at which investors trade shares of an Initial Public Offering (IPO) in the grey market. The grey market allows investors to buy and sell shares before the company lists on a stock exchange. Investors can use the IPO GMP price as a gauge of their sentiment toward an IPO to decide whether to invest.

It is important to note that the GMP price is not always an accurate predictor of how the share price will perform when the IPO lists on the stock exchange. There are a number of factors that can affect the share price on the listing, such as the level of demand from institutional investors and the overall market conditions. The GMP is simply a reflection of investor sentiment at a particular point in time. The actual performance of the shares will depend on several factors, including the company's performance, general market conditions, and other factors. One key aspect that captures the interest of potential investors is the IPO Grey Market Premium.

The IPO grey market premium refers to the premium or additional price at which IPO shares are traded unofficially before their official listing on a stock exchange. It represents the market's perception of the potential value and demand for the shares.

The IPO GMP is a term people use in the IPO market to check what is the estimated price the IPO might list. It is unofficial, but investors look at an IPO's grey market price to get the stock's fixed gain. It works before the IPO listing and during the days from the IPO start date to the allotment date. The grey market premium indicates how the IPO might react on a listing day with an estimated price.

Let's see how the IPO GMP calculation goes on. If the company comes up with an IPO of ₹100 and the grey market premium is around ₹20 then we can assume that the IPO might list at around ₹120 on its listing day. But the fact is, there is no reliability. In most cases, IPO GMP works but in some cases, it's not. We have observed that if the IPO is in demand and the estimated HNI and QIB subscription is on the higher side, the IPO list around the given price with an estimated IPO GMP.

The Kostak rate is the amount that one investor pays to the seller of an IPO application before the IPO listing. As the grey market reacts the Kostak rates also react that way. One can buy and sell their full IPO application on Kostak rates outside the market and fix their profit. The Kostak rates apply whether the investor gets the IPO allotment or not, the buyer should pay the Kostak rates for the IPO.

If the investor did 5 applications for one IPO and sold the same at ₹1000 per application it means they secured the IPO profit at ₹5000 rupees. If investor gets the allotment in 2 applications still his profit will be ₹5000. Now if the investor sells the stock and gets a profit of around ₹10000 then he or she needs to give the remaining profit of ₹5000 to the investor who bought the application. This is the secure way to sell your application in the IPO grey market.

As per the Kostak rate, the Subject to Sauda on the application is the amount decided when the investors get the firm allotment on their IPO Application. If one buys or sells the IPO application on the subject to sauda it means one can get the said amount if one gets the allotment otherwise sauda will be canceled. In this one can not fix their profit as it depends on the allotment. If the investor gets an allotment and sold the application for around ₹10000 and the profit goes high on listing day around ₹15000 then one should pay ₹5000 to the investor who bought the application.

The IPO GMP aka grey market premium is a price that is traded in the grey market before the IPO listing process. The calculation is done based on the company's performance, its demand in the grey market, and the probability of the subscription. Let's assume that if the X IPO price is fixed at ₹200 and the grey market is showing the rate of ₹100 it means the IPO might list at ₹300 (ie: ₹200+₹100). Still, this is an assumption but the actual listing might vary from the grey market price.

There are no official people or businesses associated with the grey market. Some brokers buy and sell IPO applications on Kostak Rates or Subject to Sauda Rates based on the IPO GMP. One should find local brokers who stay between buyers and sellers and do the grey market trading of IPO applications. Be aware of the rates and then do the buying or selling.

The IPO Grey Market Premium serves as an indicator of market sentiment and the perceived value of the IPO shares. It allows potential investors to gauge the level of demand and the premium they may have to pay if they wish to purchase shares during the IPO. However, it's essential to note that the GMP doesn't guarantee future performance and is subject to change.