Hello all
I see once a company offers IPO then I see news like GMP for this stock is at premium of 100 rs or 5 rs like that. What are the factors contributing the GMP and who regulates this GMP ? And how does one know the GMP? if there is no regulator, I can post a news article with content like premium of 1000rs something like false claims right. So would like to understand the GMP and background of the same.
I also have the similar question. What is the trusted source of GMP.
As per my understanding, answer for how GMP, or Grey Market Price is calculated as the name suggest lies in “grey” area. Which makes it difficult to predict.
So usually before IPO, stocks of a company is circulated internally that is within the company. In the form of ESOPs. Now these ESOP share can be sold outside secondary market (that is NSE/BSE) to someone who is not an employee of the company. And the GMP depends on the demand and supply of such ESOP shared being sold outside secondary market.
People buy shares before it lists, since they can then convert their shares in demat form once it lists and sell it for profit on exchanges.