Pre-IPO Fever or Fool’s Gold? Why Zerodha’s Nithin Kamath Says ‘Stay Away’ from CSK, NSE Shares

Zerodha co-founder Nithin Kamath has issued a stark warning to retail investors: steer clear of unlisted shares like those of Chennai Super Kings (CSK) and the National Stock Exchange (NSE). The caution comes amid a surge in retail interest in pre-IPO opportunities, but Kamath argues the risks far outweigh the promised rewards.

 

Key Highlights:

 

•⁠  ⁠Opaque Market, No Protection: Unlisted shares are traded on informal, unregulated platforms with no transparent price discovery, leaving investors vulnerable to steep markups, commissions, and manipulation.

 

•⁠  ⁠Inflated Valuations, Real Losses: Kamath cited HDB Financial Services as a cautionary tale—its IPO price band was set 40% below the last traded price on unlisted platforms, leading to substantial losses for early buyers.

 

•⁠  ⁠Lack of Liquidity: Unlike listed shares, unlisted ones can be illiquid for years, trapping investors’ money with no guarantee of exit or returns.

 

•⁠  ⁠Wealth Managers’ Role: Kamath revealed that a wealth manager recently approached Zerodha to buy an unlisted company at a steep markup, aiming to flip it to retail investors for quick profit—highlighting the risk of pump-and-dump schemes.

 

•⁠  ⁠SEBI’s Caution: Regulators like SEBI have also flagged the risks, urging investors to beware of unlisted share frenzy.

 

Outlook:

Kamath’s advice is clear: “You are better off investing in mutual funds.” With unlisted shares, the risks are real, and the promise of easy money is often just a mirage.

 

Sources: The Economic Times, Business Today, NDTV Profit