Gray Market

Gray Market – The Gray Market refers to an unofficial and unregulated market where shares of a company are traded before their official listing through an Initial Public Offering (IPO). Transactions in the gray market occur privately between brokers and investors, outside the purview of formal stock exchanges. This market enables investors to speculate on the likely listing price of shares and potentially earn profits based on anticipated demand and market trends. While it provides early trading opportunities, it carries higher risks, as prices are influenced by speculation and are not legally binding.

Example: If a company plans an IPO at ₹100 per share, gray market trading might occur at ₹110 per share, reflecting investor sentiment and expectations prior to official listing.