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Definition

The issue of large blocks of shares to specific investors before an initial public offer (IPO) usually at a discount to the listing price. These investors are taking a greater risk because the listing has not yet taken place and so their shares are not easily saleable until after the listing. In South Africa, public unlisted companies often say that they are going to list in order to encourage people to buy their shares at a "pre-listing discount". In a case like this the private investor should enquire as to who the company's sponsoring broker is and then contact that broker to establish exactly when the listing is expected to happen. If the listing is not imminent then the shares should be regarded with some suspicion. Most of the major investment scams in South Africa have involved the selling of shares in public unlisted companies.

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