Nithin Kamath raises concern over hype in unlisted market, highlights risk of investing in pre-IPO companies

Zerodha CEO Nithin Kamath on Friday flagged a huge concern investors are facing as the buzz at the IPO market grows — the issue about unlisted or grey markets.

In a post on X, Kamath raised concern against the “phenomenally stupid” stories he said was emerging out of the grey market and described how people are betting their money on pre-IPO companies in hopes of bigger gains.

"Given how hot the IPO market is, I'm hearing some phenomenally stupid stories from the unlisted market. People are blindly punting on so-called "pre-IPO" companies hoping they'll make bigger gains than during the actual IPO," Nithin Kamath said.

The Zerodha CEO pointed out that these shares come with price markups, commissions and are highly risky investments.

"The greed is causing people to ignore some hard realities: these shares already come with 100–500% markups, ridiculous commissions, and terrible pricing. The biggest risk? There have been numerous cases where the IPO price ended up lower than the price at which people bought shares in the unlisted market. All those "gains" wiped out before you even start," Nithin Kamath said.

He also flagged that platforms are sending WhatsApp forwards to push this kind of investments.

“I honestly didn't expect the unlisted share space to become this popular. Colleagues showed me a platform sending WhatsApp blasts pushing this stuff. It's kind of crazy what's happening out there,” the Zerodha CEO noted.

What are unlisted shares?

Unlisted shares are shares that have not been listed on the stock market yet, and often include pre-IPO shares. They are traded over-the-counter, and come with high risks.

How did netizens react?

Netizens on X started a discussion about the ongoing battle and agreed with Nithin Kamath, with some calling it a form of gambling.

“It’s not investing; it’s legalized gambling. People are treating the unlisted space like a lottery ticket hoping for a double on listing day,” one user said.

“Pre-IPO can make sense for institutions who get real pricing power, not for retail paying 300–500% markups. Most people don’t realise they’re entering at valuations even higher than the IPO itself,” another added.

A third user noted that the rush is just fear of missing out masked as an opportunity.

“Exactly. The ‘pre-IPO rush’ is just FOMO wrapped as opportunity. Most don’t realise they’re buying at peak markup with zero downside protection. Risk > reward in most cases,” he noted.

“The problems are with the brokers or advisors who are pushing this product to innocent investors. SEBI should totally bar this practice and family offices should be penalised if their shares come into the market for selling,” another user said.