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When it comes to investment, you can invest in the company via its listed and unlisted shares. Basically, a company that is listed on the stock exchange, like NSE, BSE, and MSE, provides their listed stocks for trading. On the other hand, many privately held companies like OYO and Tata Technologies provide unlisted shares, also known as pre-IPO stocks.

In simple language, when a company plans to get listed on any stock exchange, it brings an Initial Public Offering(IPO) and provides its shares for public sale. At the time of public listing, investors can buy the company’s IPO shares at the current face value via online trading platforms.

Today, there is a dilemma among investors between unlisted and listed shares. You might also be confused about which one is the most profitable investment option for you. Fret not; we will provide a detailed comparison between unlisted and listed shares and also suggest which one can be the best investment option for you.

An Overview Of Unlisted & Listed Shares

If you are new to the terms of listed and unlisted shares, you must understand the difference between them. Let’s have a look at each one of them below.

Unlisted Shares

The unlisted shares of the company are not available for trading on the stock exchange platforms like NSE, BSE, etc. These shares represent the company’s financial assets, which the private investors own. Unlisted shares of the company are generally traded in the unlisted share market and can be bought via online trading platforms like Stockify. Some of the examples of unlisted companies are HDFC Securities, Capgemini, OYO, etc.

Listed Shares

Listed shares are available for trading on the stock exchanges. These shares are available for public investment and represent the company’s financial equities, which are publicly available for trading. These shares can be easily bought or sold online on various stockbroking platforms.

Major Difference Between Listed And Unlisted Shares of Companies

There is a significant difference between the listed and unlisted company shares which you must be familiar with. You can easily buy both types of shares with the help of stock broking platforms. However, you need to know the difference in terms of liquidity, trading process etc.

Liquidity 

Listed shares have high liquidity, which allows investors to easily buy or sell their shares on the stock market during trading hours. It means you can easily access the funds once you decide to exit the market. On the other hand, unlisted shares lack liquidity, which means the market of unlisted companies always doesn’t have ready buyers. It will be difficult for investors to exit the market quickly or access the required funds.

Market Volatility

The stock exchanges are inherently volatile, directly affecting the listed share price, which fluctuates higher based on geographical events, economic conditions, and company-specific events and news. However, unlisted shares are less volatile and shielded from rapid price fluctuations. It makes the unlisted shares more stable and long-term growth investment options.

Transparency

Since listed companies are subjected to strict regulatory and reporting requirements, you will have access to comprehensive information about the company, including its financial health and performance. It signifies that listed shares provide transparency in different aspects. When it comes to unlisted companies, they provide limited information and transparency, which makes it difficult for investors to access the company’s financial background.

Taxation

The long-term capital gain tax on the listed shares is 10% if they reach more than 1 Lakh in the fiscal year. On the other hand, the long-term gain tax on the unlisted shares is 20% after indexation. However, short-term taxes on these shares are subjected to the applicable tax slab. So, you will have to pay higher taxes on the unlisted shares than those listed.

Entry Barriers

The entry barriers for companies to get listed on the stock exchange are higher as they must meet specific criteria. As a result, various investment opportunities remain untapped for early investors. In the case of unlisted companies, the entry barrier and risk are low for the new investors. It can potentially bring investors significant benefits once the company goes public.

Which One Is a Better Investment Option For You?

Both listed and unlisted shares have their own pros and cons, which every investor must consider before making any investment. If you are looking for an investment option that involves less risk and is profitable in the long term, unlisted shares will be the perfect option for you. However, you can explore the listed shares if you seek a highly transparnt and liquidity investment option.

If you are an early investor or looking to diversify your investment portfolio, unlisted shares will be a perfect choice for you. Don’t know how to start investing in pre-IPO shares? Worry not; online trading platforms like Stockify provide access to the trending unlisted shares and guidance from the unlisted share brokers. Ready to explore pre-IPO stocks? Connect with Stockify’s experts today!

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