New Delhi: Ace investor Rakesh Jhunjhunwala recently advised investors to keep off the unlisted space. The Big Bull sees a big bubble in the unofficial market for unlisted shares, which he said may burst in the near term. “I think there is a big bubble in all these unicorns, and this is going to burst in next 12 months. It is already bursting, and it will burst in the next 12 months,” Jhunjhunwala told ET Now in an interview earlier this week. However, dealers of unlisted shares only partially concur with the view. They argue that while there are some unicorn stocks, which are unreasonably overvalued, not all unlisted shares trade at premium valuations.Analysts from the unlisted space say Jhunjhunwala might be pointing towards stocks like Reliance Retail, which was hugely overvalued. After Reliance Industries mandated a share swap in the 4:1 ratio, the stock halved its value from the peak of Rs 900-950.“His words are partially true. There are some stocks that trade at very high valuations. Investors overvalue these stocks and pour ample wealth in them. Reliance Retail is one of them,” said Sagar Shah of Ascent Wealth Managers, a broker who deals in unlisted shares.“If something is trading at a valuation above its earnings, there are high chances of the bubble getting burst. But undervalued stocks tend to perform better, particularly near the IPO launch,”said he.Jhunjhunwala said it is a worldwide phenomenon that most of the growth has come to PE investors. “Retail money cannot be directly put in non-public companies because you have to service them. Only institutional investors can participate in this space,” the ace investor said.The Big Bull himself has a stake in gaming company Nazara Technologies, an unlisted entity. The scrip plunged over 50 per cent in the unlisted market in last one year to trade at Rs 550.Abhishek Chaturvedi, Partner, Ultimate Wealthowl said retail investors often fall for the buzz. “They usually keep asking for stocks from startups or e-commerce space, which are not making any profit,” he pointed out.Small investors usually rush in to the unlisted space when there is a buzz about an IPO. “Thus, they end up entering a stock at a time when it is already performing well. When PEs look for exit at premium valuations, small investors enter the stock. When the IPO is about to hit the market, it means the stock is at its optimum price,” he said.Other analysts point out that investors in unlisted market are keen to bet on e-commerce and startup unicorns like Ola, Oyo, Paytm and Flipkart at premium valuations. However, none of them has posted a profit yet.They say every investor wants to multiply wealth in the unlisted market within a short span of time. “However, minting money does not happen overnight. One has to put money in the right stock with strong fundamentals and growth prospects,” he said.Off-market trade is riskier than the listed space as disclosures, volumes and liquidity are low. However, the risk-reward is often better, which is what usually draws high net worth investors into this space.Sandip Ginodia, Founder, Abhishek Securities, says unlisted shares in the e-commerce space can be minefields. “These stocks do not have much demand or depth. They are not reliable investments. Investors should not touch them at absurd valuations,” he said.Dealers from the unlisted space said investors must look for companies that have a strong parentage, robust balance sheets, sound managements and good business value. “Stocks with such pedigrees will perform in both listed and unlisted space,” he said.Besides Nazara and Reliance Retail, unlisted stocks like Metropolitan Stock Exchange of India, Essar Steel and Kitply Industries have destroyed investor wealth. On the other hand, HDB Financial, Chennai Super Kings and Hero FinoCorp have become multibaggers in off-market trade in last 3-4 years.Delhi-based investor Ashish Chugh said the unlisted space is full of new-age businesses. “While some of these businesses will scale up and create huge value, many others are mediocre and are available at very expensive valuations when benchmarked against their listed counterparts. The valuation of a business is primarily a function of its ability to generate cash flows, grow up in size and become a dominant player in its segment,” Chugh said.“Valuations in the private space are stretched mainly due to availability of easy funding from private equity players. The bubble is bound to burst, and the blowup of a few large PE players may be the trigger for return of sanity in valuations in this space,” he said.