Flagging steep valuations accorded to many IPO-bound companies, Kamath said these shares trade at a 100-500% premium and many recent listings have been big disappointments.
“Given how hot the IPO market is, I’m hearing some phenomenally stupid stories from the unlisted market. People are blindly punting on so-called “pre-IPO” companies hoping they’ll make bigger gains than during the actual IPO. The greed is causing people to ignore some hard realities: these shares already come with 100–500% markups, ridiculous commissions, and terrible pricing. The biggest risk? There have been numerous cases where the IPO price ended up lower than the price at which people bought shares in the unlisted market. All those “gains” wiped out before you even start,” Kamath said.
Expressing his surprise over the speed and scale at which unlisted shares have become popular, the Zerodha founder shared how a platform was bombarding investors with WhatsApp messages.
“I honestly didn’t expect the unlisted share space to become this popular. Colleagues showed me a platform sending WhatsApp blasts pushing this stuff. It’s kind of crazy what’s happening out there,” Kamath said.
Kamath has long been vocal about the need for better financial awareness among Indian investors. His latest warning comes amid a red-hot primary market where strong listings have emboldened a new wave of speculative activity — especially in the opaque, lightly regulated world of unlisted shares.His message to investors is a warning against FOMO overriding common sense.In his recent tweet, Kamath also warned investors against the dangers associated with cryptocurrency derivatives trades. Likening it to Shrodinger’s cat, Kamath said that the exchanges exist in a regulatory limbo – neither fully regulated nor unregulated and investors run the risk of going bust. He also explains why it could be in platform’s interest if traders trading on it lose money.
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