What is Share Pledging?
This blog is to understand what is pledging of shares and the effect of pledging of shares by the Promoters on the stock market performance of the company. What is pledging of shares? To explain it in simple words, pledging is a common practice that the shareholders perform (i.e borrowing loans against the shares they hold ) to meet various financial requirements. Pledging of shares by Promoters: Promoters pledge their shares to raise funds, which means that promoters use their stake as a security to take loans. The Promoters can raise funds by other ways like equity funding and debts. These are safer than the pledging of shares. Then why do promoters go for the option of pledging of shares? Promoters pledge their shares generally when all other options of raising funds are closed and pledging is the only option left. How does pledging of shares impact stock market performance? An investor before investing in a particular stock investigates various aspects and pledging of s...