November 25, 2022

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Listed And Unlisted Shares: Know The Differences

3 min read
unlisted shares

You must have confronted the buzz of shares in the stock market, their prices rising and plummeting and folks buying and selling them off. These shares are traded in the open market, and hence, people actively engage in investments here. At the same time, there are stocks circulating in a few hands, not bartered openly in the market and obscure to most people out there. These fundamental differences give rise to two categories of shares in the stock market, namely listed and unlisted shares, which we shall discuss here. 

Deep Analysis

Do you get confused that what does listed and unlisted shares refer to? Unlisted stocks are the shares of the firms that have not yet listed themselves on the stock exchange, such as BSE or NSE, through IPO (initial public offering). Already-listed companies who want to present new stocks may also issue shares not listed on the exchange yet. As they are not accessible on the official platform, they are a part of a closed market. Unlisted shares pique the interest of high rollers because the risk involved here is high and returns too lucrative to resist. 

Coming to the next category of stocks, i.e., listed shares. Companies register these shares on the stock exchange by issuing IPO (initial public offering) and availing them to the public. Listed stocks are traded on the exchanges openly and, the shareholders get to own them. Further, they relish proportional dividends on the profit that a company earns. 

What are the differences between unlisted & listed shares?

Both types of shares belong to different market domains. And hence, bear plenty of differences concerning their ownership, trading procedure, liquidity, regulations, investment process, and so forth. Here is a thorough elaboration of the main divergences between the two:

  • Benefits: With listed shares, one gets to enjoy benefits like less risk, transparent trading, dividends, voting entitlement, liquidity, and so on. However, investment in unlisted shares brings in values such as exceptionally high returns. Further, trading in the latter is governed by less austere regulations. 
  • Risk: Investment in listed shares is safer compared to unlisted stocks. This is because unlisted shares are illiquid financial securities. Further, the chances of a listed company’s culmination are more heightened compared to an unlisted one. 
  • Regulations: SEBI is the statutory authority that regulates the stock exchange. Since the unlisted shares list is not posted on this official exchange body, not many rules bind the trading process here. While listed companies in their actions have to adhere to stringent directives. 
  • Liquidity: Listed shares are negotiated in high volume and therefore offer more liquidity. On the other hand, unlisted stocks are lesser and traded furtively, hence providing low liquidity. This feature makes them suitable as a long-term investment choice. 
  • Ownership: When you purchase shares of a listed company, you receive ownership of your claim, voting rights, and equitable allocation of dividends. However, trading in unlisted stocks does not get you any gains. 

So, far we learned the contrast between unlisted and listed stocks, which comes out to be stark. These points of distinction will surely help you decide where to invest.