The real risks of investing in unlisted shares

Unlisted shares can be rewarding, but they carry risks that listed-market investors are not used to. Knowing them upfront helps you size positions sensibly.

1. Liquidity risk

You cannot sell with a tap on your phone. Finding a buyer can take days or weeks, and in a weak market the price you can get may be well below the last quote. Only invest money you will not need for several years.

2. Information risk

Unlisted companies disclose less, and less often, than listed ones. Annual accounts may be months old by the time you read them. Offer documents filed ahead of an IPO are the most detailed disclosures you are likely to see.

3. Valuation risk

Quotes are influenced by the last funding round and by excitement around an expected IPO. It is possible to pay a price that the public market later refuses to support. Compare ratios with listed peers before buying.

4. Timing risk

IPO plans slip. Markets turn, regulators raise questions, companies decide to raise private capital instead. A three-year holding can become five.

5. Transaction risk

Most problems in private share deals come from paying the wrong party. Protect yourself:

• Pay only after your order is confirmed on the platform
• Pay only by bank transfer to the account shown on your order, never cash
• Make sure the shares are credited to your own demat account

How to manage these risks

• Diversify across several companies and sectors
• Size positions so that any single one could go to zero without derailing your finances
• Read the documents on each product page
• Ask questions before you pay, not after

None of these risks is a reason to avoid unlisted shares altogether. They are reasons to approach them deliberately.