How to Sell Unlisted Shares in Secondary Market?

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January 28, 2024
How to Sell Unlisted Shares in Secondary Market?

What is a Secondary Market?

The secondary market refers to the marketplace where investors buy and sell securities they already own, after the initial offering by the issuer. For shareholders with stock in pre-IPO companies, the secondary market provides an avenue to sell their shares prior to a liquidity event.

In this blog, we will discuss how to sell shares in the secondary market, with a focus on pre-IPO stock.  

What is a Pre-IPO stock?

Pre-IPO stock refers to shares in a company that are sold before the company goes public. Investors find pre-IPO stock appealing because they can potentially buy shares at a lower price than they would pay after the company goes public. However, pre-IPO stock also comes with risks, such as the possibility that the company will not go public or that the shares will not increase in value as expected.

How are Unlisted shares different from the Listed shares?

The primary difference is that listed shares are traded on an exchange whereas unlisted shares are not. Unlisted companies can further be split into two types: Private limited companies and public limited companies.  

Private Companies vs Public Companies

Shares of public limited companies are freely transferable and there are brokers and intermediaries who can provide interested investors access to public limited company shares. Liquidity, while not as good as in listed markets, is still quite good, and achieving liquidity depends on a few factors such as expected premium or discount to prevailing market price, quantum of the stock expected to be sold, and quality of the Company in question. For a good quality public limited company stock, one can obtain liquidity in a few hours to a few days.

Private limited company shares on the other hand are not freely transferable and are typically subject to Board approvals, sale restrictions, etc. The transactions are also more complex compared to public limited company transactions.

Typically, private limited companies convert into public limited companies as they mature and achieve scale. At this point, these companies’ shares start to trade more frequently in the “unlisted” markets.   

Unlisted shares are governed by the Ministry of Corporate Affairs and shareholders of unlisted companies have the usual rights accorded to company shareholders guaranteed by Company law. Typically, contracts are also signed to govern the transfer of shares in the unlisted space, and this is governed by contract law or other laws that are in place to protect buyers or sellers.

Who Should Invest in Unlisted Shares?

When it comes to investing in unlisted shares, many retail investors wonder if they should participate or if this market is only suited for High Ultra Net Worth Individuals (UHNIs). Rather than using total net worth as the deciding factor, a more relevant metric is investible surplus - your assets excluding your primary residence.   

For investors with an investible surplus of 1 crore, unlisted shares can be considered as part of a diversified portfolio, along with other assets like listed equity, debt, gold, etc. The key is proper asset allocation based on your financial goals, time horizon, and risk appetite.  

While risks are higher, unlisted shares offer the possibility of generating outsized returns compared to traditional listed equity. Their illiquid nature makes them better suited to patient investors with a long-term outlook rather than those needing short-term liquidity. Do your due diligence and make informed decisions aligned to your needs when venturing into unlisted shares.

What is the minimum ticket size for making investments in public and private companies?

For public limited companies, the minimum ticket size can be as low as the price of 1 share, assuming there is a seller willing to part with just 1 share. Put differently, it means that the ticket size for a buyer can be as low as what a seller is willing to part with.

Private limited companies typically like to monitor the number of individual shareholders, considering they cannot exceed 200 non-employee shareholders. The deal sizes happen to be larger and limited to more sophisticated family offices, High Ultra Net Worth Individuals (UHNIs), or institutional investors. Ticket sizes usually will be at least a few lakhs/ few crores, but really dependent on the scale of the company.

Has it created multibaggers?

Every listed company today was once unlisted – Today an increasing number of venture funded companies are getting listed, and we will see many more of these in the future. A few examples would be companies like Zomato, Paytm, Nykaa etc which have all created significant wealth in the unlisted space before they went public. Companies such as NSE, Chennai Super Kings, etc are companies that have created wealth for investors in the unlisted public limited company space.

What are the key risks involved in unlisted shares?

Investing in equities itself involves risks, and these risks are the same nature but greater in size for unlisted equities. Typically, a company getting listed means it has passed certain milestones in business scale and maturity, and certain governance and disclosure requirements by SEBI. Conversely, unlisted companies will be smaller, less mature, have less controls and reporting requirements, compared to a listed company. Unlisted investments will also always be less liquid than listed investments.

While investing in this space involves risks, as with any other asset class, one needs to understand the asset class and asset thoroughly before investing, mindful of the risk and making their own risk-reward calculations.


In conclusion, selling shares in the secondary market is an important way for investors to gain liquidity and for new investors to buy shares in a company. When selling pre-IPO shares, investors should carefully consider the method they use and evaluate investment opportunities. There are several secondary marketplaces where investors can buy and sell pre-IPO shares, and investors should choose a marketplace that meets their needs in terms of fees, minimum sale size, and control over the sale.

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