Business Standard

Zee stock crash shows why you should avoid firms with high pledged shares

A decline in stock price, due to rumours of impending default, can trigger a big selloff

stocks
Premium

stocks

Sanjay Kumar Singh
Shares of Zee group companies took a severe pounding last Friday. Promoter Subhash Chandra has pledged the shares in his listed companies to borrow money for paying off debts incurred to fund the group’s infrastructure foray. The event highlighted the risk investors run when they buy a stock where the level of shareholding pledged by the promoter is high. 

Promoters generally opt for pledging as a last resort, when they are unable to raise money through debt or equity issuance, which could be because their company is already highly leveraged. They then resort to a loan from a bank, non-banking finance

Don't miss the most important news and views of the day. Get them on our Telegram channel

First Published: Jan 31 2019 | 1:36 AM IST

Explore News

To read the full story, subscribe to BS Premium now, at just Rs 249/ month.

Key stories on business-standard.com are available only to BS Premium subscribers.

Register to read more on Business-Standard.com