(4) Company’s Plan To Delist Its Stock
It is one of the most surprising reasons why company promoters accumulating shares in a given stock. Stock delisting is the process of removing a publicly listed security from stock exchange.
It is simply a move taken to privatize or to move to the over-the-counter (OTC) markets. When company management or promoters have decided to delist their stock, they may start increasing their stake gradually.
According to a post published in Business Today, a company has to make an open offer to the public if it wants to get delisted.
Additionally, public holding shouldn’t be more than 10 percent after the open offer for delisting to happen.
Therefore, an increased stake of promoters will correspond to less stake of public shareholding pattern. In such a situation, the delisting process is likely to be successful without any hassle.
Thus, small investors can take the advantage of such unique offer to sell their stake at higher prices.
(5) Corporate Restructuring In Process
It is one of the most critical reasons why company promoters increasing stake in a given security. Promoters are actively involved in the day-to-day functioning of a business organization.
They often take decisions unanimously for the welfare of the business organization. However, promoters with higher stake are likely to lead others with lesser stakes.
Therefore, one or more promoters may consider accumulating more shares from open market. It is a smart step towards acquiring a controlling stake in the company. If such accumulation is performed by a big & highly reputed promoter then it is surely a positive signal for the investors.
For example, in Hexaware Technologies, promoters stake increased from 28% (March 2013) to 64% (March 2014). Finally, Baring Private Equity Asia acquired a controlling stake in the company.
Thus, investors are adviced to remain invested in such stocks for profitable returns.
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