InvestorQ : What is meant by Kostak and GMP?
Arya Nanda made post

What is meant by Kostak and GMP?

Anjana Aiyar answered.
3 years ago

Now you are getting into the IPO grey market. Before an issue lists, trading activity may start in the informal market and both these terms are important benchmarks in the grey market. In grey market trades, shares allotted to IPO applications are sold by brokers without actually transferring the securities to their own accounts. The market is typically driven by high net-worth individual (HNI) investors who direct brokers to purchase applications from investors at a price which is called Kostak. IPO investors who sell their applications at kostak rates are not bothered about the allotment as kostak is not dependent on successful allotment. This is not an officially recognized market.

GMP stands for Grey Market Premium and it indicates the premium per share on which IPO trades happen in the informal market. GMP is the amount per share which an investor gets from the broker or individual who buy them before listing of the shares which might get allotted in the application.