GMP Of Upcoming IPO

From the pool of IPOs coming this year, every interested individual is out looking for the GMP of upcoming IPO. But, do you know what GMP (Grey Market Premium) is precisely?

No?

Well, don’t worry.

We got you covered. Read along for all the information in this regard.

First, we must understand what Grey Market is?

Grey Market is the place where unregulated over-the-counter trading is done for IPO applications and the IPO shares, even before the stock is listed on a stock exchange.

It is a way used by dealers to support their customers and clients who may wish to exit the trade before it gets listed. It is also used as a method to support the IPO before its listing and boost the listing price of the share.

Since it is an unregulated market space, it is not backed by any stock exchange, the regulatory body – SEBI, or the company getting listed. It operates on Cash transactions, and trust is the most crucial factor in the grey market. 

There are two types of transactions that happen in the Grey Market. They are:

1. Trading IPO shares on the Grey Market Premium
2. Trading IPO application on a Kostak.

Here, we will talk about the former only.

Now, let us learn the definition of Grey Market Premium (GMP) and determine how to calculate GMP of IPO.

Note – All these articles will be updated regularly. (Last Updated On – 08 March 2021 & 2:33 PM)

How To Calculate GMP Of IPO?

GMP or Grey Market Premium is a premium at which the equity shares of an upcoming IPO are traded in the grey market. The premium can be positive or negative depending on the demand of the shares.

The premium is positive if the trading price in the grey market is higher than the issue price and vice versa.

With the definition of GMP clear, let us understand the process to calculate it.

The share market works on the demand and supply game entirely. So, there is no denying that even Grey Market works on the same.

If the subscription of an IPO is more than the shares stated, the GMP is more, and if the demand is not so much, it will be less.

So, the GMP rises or declines according to the demand of IPO in the grey market.

Now that we understand GMP let us make a list of GMP of upcoming IPO.

 

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Conclusion

GMP or Grey market premium is a price that is decided on the basis of the demand of the IPO shares in the grey market. GMP of upcoming IPO is a considerable parameter that affects the listing price of any IPO.

The traders and investors keep a constant eye on the grey market premium to predict the prices post IPO and sketch out a strategy accordingly.

We hope that all of your queries regarding the GMP of upcoming IPO have been resolved.

Happy trading!

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