Methods used for the Valuation of Unlisted Shares

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Among the multiple varieties of shares, there are blocks of shares called unlisted shares. These unlisted shares can not pass the estimation of their market value. Nevertheless, these are essential for assessing the value of an organization, including the current accounting of the organization’s assets and citizens’ taxation. Unlisted shares, those with real significance for investors, need a special valuation mechanism to determine their real value.

In the initial stages, a start-up can face peculiarities of the development, and not all companies have enough resources to become free participants in the stock market. In the financial sector, the latter makes a massive change with a large number of unlisted shares. For those who buy unlisted shares online, it is essential to know that a methodological approach system is developed that allows organizations to perform various actions with their documentary assets, and such securities are periodically revalued.

Holders of unlisted shares

Unlisted care holders can be a person or organizations that act as holders of shares and do not have quotations:

  • Unlisted shareholders can be small and medium-sized companies that are looking for potential investors by issuing their own pre ipo stock. However, these companies lack sufficient packages of securities to make an entry into the National Stock Exchange platform, but everyone can buy pre ipo stock from other platforms;
  • Organizations that are denied access from the official stock exchange. These companies include business structures that have not passed the correct listing procedure;
  • Companies that are on the verge of bankruptcy;
  • Organizations that have non-profitable production or very low income;
  • enterprises with the possibility of immediate closure;
  • employees of businesses accepting shares as a form of rewards or part of the payment for their work;
  • people who acquire shares in the process of inheritance or donation;

Valuation methods for unlisted shares

There are basically three methodological bases and several modifications for evaluating unlisted shares that are not available on the stock exchange. 

Comparative approach:

This principle uses the concept of comparing the target under consideration with similar businesses for which there is a market evaluation available;

Profitable methods: 

  • Discounted cash flow involves an evaluation of the level of future income that may interest the investor.
  • The method of capitalization applies to the estimation of shares of stable companies;

Property approach:

This method utilized the concept of replacement that allows you to estimate the number of funds required for the achieved level of development of the organization under study.

The concept of net assets helps you determine the cost of replacing the main elements of an asset for a certain period of time.

While evaluating unlisted shares, you should consider the following indicators:

  • information about loans;
  • the presence of encumbrances;
  • fixed assets;
  • premises that are rented;
  • the presence of subsidiaries;
  • conclusions of audits.

Where can you buy unlisted shares?

You can easily buy them. Although unlisted shares are not listed on stock exchanges, there are two options for purchasing them:

  • Directly from shareholders;
  • On sites/apps that provide such an opportunity.

You can buy unlisted shares safely from the website www.unlistedassets.com. To do this, you should select the appropriate offer, carefully read the list of shares, and apply for the purchase of assets. You can easily make payments using an Escrow Bank Account of a SEBI registered Trustee. For convenience, once the transaction is complete, they will share all the necessary information in your Demat account.