🔴 #3 Highest Ever Promoter Selling

Analyzing promoter shareholding, FREE course on stock market investing, and OCCRP's report on Adani

📌 What you’ll learn in <5 minutes

  • How Promoter Stake Sales Affect Stock Prices & Company Fundamentals

  • FREE Course on Investing for Beginners

  • Adani being accused of cheating again & other new stuff at Upsurge

⚠️ Promoter stake dilution at record levels

Promoters have sold 4x times more shares in 2023 (till August) as compared to 2018 levels and double compared to 2022, in India.

Promoter holding refers to the percentage of shares held by the company’s promoters i.e., the individual who founded or is controlling the company. It indicates the promoter’s confidence in the company’s future performance. Generally, the higher the promoter stake, the higher the confidence. Companies with high promoter holdings are also more stable.

👀 A change in the promoter’s stake says something

A promoter stake of 22% or 65% may look bad or good respectively. But absolute numbers don’t give the right conclusion. You should look at the change in stake over time. Promoter holding rising from 15% to 18% to 22% is a good sign while the stake reducing from 75% to 70% to 65% can indicate a problem.

An increase in the promoter’s holding is seen as a positive sign as it shows their optimism about the company’s growth potential. A promoter can increase their stake by buying it back from the open market. Inversely, a decrease in promoter holding indicates that the promoters are not confident in the company’s growth.

You can check promoter holdings on BSE/NSE and tools like Screener. You can learn more about it in our Investing for Beginners Course.

Let’s look at some stake changes & their stock returns post the change:

❗️ Promoters playing the pump & dump game

Recently, ‘The Advisor’ and ‘Moneywise’ Youtuber Manish Mishra encouraged investors to buy stocks of Sadhna Broadcast and Sharpline Broadcast on his channel, shares of which he already owned. The huge traction took the share price from INR 10 to INR 30 in just 3 months.

Promoters of Sadhna Broadcast were also involved in the scam as one can see their stake decreasing from 41% in March 2022 to 25.5% in June 2023. The number of small individual investors in Sadhna increased from 21,000 in June 2022 to 55,000 in September 2022; with their stake growing from 3.5% to 25%. Currently, the stock is trading at INR 5.

We can see how promoters fooled the public to make a buck from this event. Small-cap stocks especially, are more vulnerable to such scams because of their low public float; and one should beware of such scandals!

🤨 Is a decline in holdings always a negative sign?

As you must be wondering, promoter selling is not always bad. The following cases mean the stake change is not a bad thing:

  • DII & FII investment increasing in tandem with promoter stake decline

  • Promoters holding >75% of the company have to mandatorily divest additional shares to the public to comply with SEBI rules

  • Money raised for a good reason, like to invest in a related company

📈 Promoter Holding Analysis & other investing basics explained for FREE

You have now got an idea about what a change in promoter stake means for a company, but you need to look at a variety of more things before investing in a stock.

Get the Upsurge’s Investing for Beginners Course for free, where Mr. Kunal Shah has covered the basics of stock market investing, busted myths, and explained how to analyze a company ⬇️

♨️ OCCRP report on Adani & other new stuff at Upsurge

Adani is being accused of fraud again, but with proof this time:

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