Leveraged Promoters, Haemorrhaged Stockholders | Value Investing News

Leveraged Promoters, Haemorrhaged Stockholders

  • What will happen next is that the lenders who hold the collateral will dump it in the market and the stock price will crash.
  • And if the market believes that no money will come or not enough will come (and the market may be right or wrong about this belief), then the stock price will crash because of what we call as “supply overhang.” Notice, for the stock price to crash, it is not necessary for the actual dumping of shares to occur, although that’s often the case.
  • It’s the EXPECTATION of the stock price crash that creates the stock price crash.
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