How Buying Pre-IPO Shares Actually Works

Unlisted or pre-IPO shares are shares in a company that has not yet listed on a stock exchange like the BSE or NSE. Buying these shares means owning a small part of the company before the general public gets a chance to.

Unlike listed shares, which can be bought and sold on an exchange in seconds, unlisted shares change hands through a private, paperwork-based process, usually arranged by a specialist platform or broker.

Buying unlisted shares typically involves proving your identity through KYC checks, agreeing a price with the seller, and then transferring the shares through the official depository system, similar in spirit to how listed shares are held electronically.

This process usually takes a few days to complete, and both the buyer and seller need to be properly verified before the transfer can go through.

If the company does eventually list on the stock exchange, investors are often required to wait a set period after listing before they are allowed to sell their shares, known as a lock-in period.

There is no guarantee the company will list at all, or that it will list on the timeline investors expect. Until it does, there is no easy way to sell these shares, which is an important risk to understand upfront.

Because there is no daily market price, it can also be harder to know exactly what your shares are really worth at any given moment, compared to a listed stock you can check every day.

Before buying, it helps to understand the company's current financial health, why the seller is selling, and what your realistic path to eventually selling your own shares looks like.