There are many risks involved in the purchase of Studds Accessories Limited unlisted shares.
The primary and most important risk is liquidity. When you need to sell your shares, you may have difficulty finding purchasers. If a company’s fundamental performance is poor in the unlisted market, the price of its shares will fall, and finding a buyer will become difficult. If the company is functioning well, then liquidity may not be an issue.
The second threat is due to a delayed IPO. The majority of investors in the unlisted market invest with the expectation that if an IPO occurs, they will be able to sell their investments at a greater price. Therefore, it will take time to sell their unlisted shares if the IPO is delayed. Moreover, if an IPO is delayed, demand in the unlisted market decreases as well. Therefore, selling will become difficult.
The third concern is the absence of a regulatory framework. Currently, SEBI has no regulations regarding the unlisted market. Therefore, you may end up purchasing unlisted shares at a greater price than what they will receive in the IPO. This will lead to losses on the investment.
The listed market is regulated while the unlisted market is unregulated. If the intermediary doesn’t transfer the shares, then you can lose your money. Trading in the unlisted market is completely based on trust.