What is Kostak Price in IPO?
The financial market is a dynamic market where there are changes every minute. So, the share market is something that should be followed very closely if someone wants to become a part of it. Currently, there is something called IPO Grey market. Before the IPO is officially launched in the stock market, there is unofficial bidding of the IPO in a market which is known as the grey market. These are personal transactions so they are mostly done in the form of cash and brokers aren’t involved in it. In the grey market, the IPO applications are sold for a premium and also the IPO shares are up for sale before it reaches the stock markets. The price is generally paid in Grey Market Premium or in Kostak.
Kostak Price Gray Market:
The Kostak is the trading value that is attached to the IPO grey market which one pays for the IPO applications. It is the premium amount calculated in rupees of the trading. In simple terms, it is often defined as the IPO’s premium value of the maximum lot of retail application. Kostak price is quite different from the issue price that one has to pay when the application is officially in the stock market.
Kostak prices are generally paid by buyers who are able to take the risk. They may pay a certain amount to the seller and make an agreement between them. For example, if an IPO costs 1 lakh rupees, then they can make a deal and buy it for Rs 5000. This Rs 5000 becomes the Kostak price. Then, the buyer will sell the shares on the IPO’s official launch date and then the buyer and the seller can settle the price between them. But the seller still has to bear the tax liability of the IPO as they are the official seller.
So, here are the things that you needed to know about Kostak price. This is getting popular day by day due to the rise of grey markets of IPO.