IPO GMP vs Grey Market Price: What’s the Difference?
1. Definitions
IPO GMP (Grey Market Premium): The premium or discount at which IPO shares trade in the unofficial grey market compared to the issue price.
Grey Market Price: The absolute price at which IPO shares are being traded in the grey market before listing.
2. Key Differences
Parameter | IPO GMP | Grey Market Price |
---|---|---|
What it represents | Premium/discount to issue price | Actual trading price |
Calculation | GMP = Grey Market Price – Issue Price | Determined by supply-demand in grey market |
Example | ₹50 premium on ₹200 issue price | ₹250 trading price |
Usage | To gauge premium/discount percentage | To know exact trading value |
3. Practical Example
For an IPO with:
- Issue Price: ₹500
- Grey Market Price: ₹600
Then:
- GMP: ₹100 (20% premium)
- Grey Market Price: ₹600
4. Why Both Matter
GMP helps you understand:
- How much premium investors are willing to pay
- Market sentiment about the IPO
Grey Market Price helps you:
- Know the exact price for trading
- Calculate potential profits/losses
5. Important Notes
- GMP is derived from the grey market price
- Both are unofficial indicators
- Actual listing price may differ significantly
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