15 Big Reasons Why Company Promoters Selling Stake

Reasons Why Company Promoters Selling Stake. Company promoters planning to sell their stake.

(10) Promoters Selling Ahead Of Dividend Cut

It is one of the most significant reasons why promoters are offloading stake in a given stock. Several companies are widely known for distributing high dividends to its investors.

These high dividend paying stocks are found to have high promoters stake. It is because promoters get benefited in form of dividend income.

But, if a dividend paying company plans to cut or completely swap the dividend in coming quarter due to any reason then some promoters may prefer to reduce their stake. This should not be considered as negative information as long as dividend cut is made to boost the growth of company.

However, if dividend cut is made due to difficult business scenario then its stock price is likely to come down. Thus, investors should analyze the main reasons behind dividend cut before investing in such scripts.

[Read Also: 10 Different Types Of Stocks That Makes Ideal Stock Portfolio]

(11) Promoters Exiting Due To Possibility Of Cash Crunch

It is one of the most critical reasons why company promoters selling stake in a given script. Every company needs some form of cash to run its business operations on track.

But, if a company has made wrong investments or its capital is falling short to meet its rising needs then the company operations are likely to get affected severely.

This situation becomes more difficult if the company is unable to raise further money to meet its requirement. Once this difficult situation is assessed by market, the stock price may witness a huge crash.

Therefore, promoters who are well aware of cash difficulties may prefer to reduce their stake before it is assessed by stock markets. Thus, small investors needs to be extra cautious while investing in such securities.

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