RE:RE:Answers To Shiftone Regarding Credit Facility Why do promotors pledge shares? Why is pledging shares risky?
Promoters pledge shares to meet various operational requirements. Generally, pledging of shares is considered as the last resort for the promoters to raise funds. Raising funds by issuing debt or equity is comparatively safer than pledging shares held by promoters. If they are planning to pledge shares, it means that all the other options to raise capital have been closed.
Companies consider this option when they are in immediate requirement of funds. If a company’s shares are not performing well in the market due to uncertainty or poor past performance, then pledging shares is the best available option for the promoters.