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A guide to the unlisted stock exchange

Unlisted shares/stocks are not registered on conventional stock exchanges. Unlisted stocks are riskier than listed shares since their liquidity is restricted since they’re not traded on a stock exchange. They are less open, but their values are more solid. So, if you can find an unlisted share with all of the potential to be listed and a firm with potential growth, your returns will be significantly boosted.

An unlisted stock exchange is traded on the counter where both seller and buyer of these shares trade the assets directly rather than through middlemen. As a result of the lack of regulation and organization in this market, dealing in unlisted shares carries a credit risk. On the other hand, Unlisted shares are often exchanged between businesses, large brokerages, and High net worth individuals or institutional clients. As a result, the risk of unlisted shares is reduced according to the market’s reputation. The risk is also reduced if you pick the correct intermediary for dealing in unlisted shares. NSE share price unlisted, for example, has gone through a dramatic rise in the last year

Difference between delisted and unlisted shares

In comparison, unlisted shares are all those that have not yet been listed on stock exchanges. In contrast, delisted stocks have been listed initially but have since been removed from the share category. Traditionally, you could buy and trade in unlisted shares in marketplaces, but you can’t negotiate or invest in delisted shares. Delisted stocks are also not accessible, including conventional stock exchanges and over-the-counter markets.

Valuating Unlisted shares

The Fair Market Value (FMV) approach is used to determine the value of unlisted shares. FMV is computed by recruiters or finance professionals since unlisted stocks are not traded on a stock exchange and hence have no actual market price. The carrying amount of all the company’s liabilities are removed from the stock price of all the company’s assets to arrive at the market price. The result is then multiplied by the paid-up value of equity capital and afterward scaled by the total value of compensated share capital.

Tax

The tax consequences are also different as unlisted shares differ from listed shares. If your unlisted shares are on sale in 2 years, the proceeds are subject to short-term tax on capital gains, which charges at the marginal income tax rate. If it is traded after 24 months, it will be subject to a 20% long-term taxable income and the advantage of indexation. However, until the shares list on a professional stock market, the gains are computed using the FMV. If the unlisted stocks you bought feature on the listed stock market and you sell your ownership, the tax consequences will be the same as if you sold listed equity shares.

Choosing the perfect unlisted share can prove a blessing in disguise for your current assets. Many investors receive exponential benefits from these shares. Make your choice wisely and choose the fair share to add to your asset to boost your savings!

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