Promoter pledge
Also called: pledged shares, share pledging, encumbered shares
Promoters using their shares as security for loans, which lenders can sell if the share price falls too far.
Pledges are disclosed in the quarterly shareholding pattern. A sharp fall in the share price can trigger margin calls and forced selling, deepening the fall for every shareholder. Heavy or rising pledging can also signal financial stress in the promoter's wider group.
Learn more in these lessons
- Promoter pledgingWhy does it matter when a company's promoters pledge their shares?
- Case study: an accounting fraud (Satyam, 2009)What can investors learn from the Satyam accounting fraud?
- Reading exchange filingsWhich company filings on the stock exchanges matter, and how do you read them?
Related terms
Spotted a mistake or something unclear? Report it by email. Here is how corrections work.