15 Big Reasons Why Company Promoters Selling Stake

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

(12) Stake Sale Due To Overall Negative Market Sentiments

It is one of the most shocking reasons why company promoters selling stake in a given stock. Every stock tends to appreciate more in terms of price when market sentiments are positive.

If market sentiments are negative then even the fundamentally strong company fails to appreciate much. Like every investors, promoters are also investors who remain invested only to generate some money.

Markets sentiments can play a major role in continuing their stake for a long time. If they assess negative market sentiments especially during economic recession they may prefer to exit.

Sometimes, they prefer to sit on the sideline until favorable conditions are returned. On return of favorable conditions they may again start accumulating stocks at lower levels.

[Read Also: 15 Biggest Emotional Mistakes Of Shareholders In Stock Markets]

(13) Promoters Selling Stake For Better Tax Planning

It is one of the possible reasons why company promoters selling stake in a given security. Every investor whose earnings are taxable as per the income tax slab of his/her country has to pay tax.

Promoters are also required to pay tax for any capital gains made by them. In order to minimize their capital gains they may prefer to cut their stake in loss making companies.

It is usually done near the end of financial year to adjust capital gains with capital loss. It is completely normal situation that is nothing to do with the fundamentals of the company.

Investors should never consider this step as negative for the stock. These types of promoters can again increase their stake at favorable entry points anytime.

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