IPO Terminology
Kostak Rate
Kostak Rate is the amount an investor receives by selling their IPO application to a buyer in the grey market before the allotment is declared. The seller gets the Kostak rate amount regardless of whether they get allotment or not, transfering the risk to the buyer.
Why it matters
Selling an application on Kostak secures a fixed profit for the applicant, while the buyer assumes all risk and reward of the eventual allotment.
Common Questions about Kostak Rate
What is the difference between GMP and Kostak?
GMP applies per share, while Kostak Rate is paid per full application. Kostak profit is guaranteed for the seller, whereas GMP gains depend on getting allotment.