Definition
Kostak Rate
The Kostak rate is the fixed amount a grey-market buyer pays to acquire an IPO application, regardless of whether shares are ultimately allotted.
In the IPO grey market, a Kostak deal is the sale of a full IPO application for a fixed sum. The buyer pays the seller this amount upfront and takes on the entire allotment risk — if shares are allotted, the buyer keeps them; if not, the seller still keeps the Kostak amount.
Kostak rates are quoted informally by grey-market dealers and have no legal backing in India. Like the GMP, they are speculative indicators and carry counterparty risk, since these deals are not recognised by SEBI or the exchanges.
Related terms
- Grey Market Premium (GMP)GMP is the unofficial, over-the-counter premium at which IPO shares or applications trade before listing, used as an informal indicator of expected listing gains.
- Listing GainListing gain is the profit an investor makes when an IPO share lists on the exchange above its issue price.
- Subject to Sauda'Subject to Sauda' is a conditional grey-market IPO deal where an applicant agrees to sell their allotted shares for a fixed premium — but the trade only settles if the application actually receives an allotment.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.