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POSTED BY ON November 7, 2012 11:43 am COMMENTS (12)
What will hapen if all investors sell their shares in a company say (TATA) will it affect the profatibility or earnings of TATA.
Here in the above case their is two SCENARIO
1. TATA has poor sales so all people are selling now in this situaton will TATA make more loss if people sell their shares.
2. TATA has good sales than also people are selling their shares now in this situaton will TATA make any loss or gain if people sell their shares.
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Dear Radhe, you question was very god but you missed a point, If every body wants to sell only & nobody wants to purchase, the selling ‘ll be halted & no more sell transactions ‘ll happen. Yes in the process, price of stock ‘ll also come down heavily & suddenly.
thanks
Ashal
Yes , I agree so . Actually I wanted to ask this only but landed here with somethingelse. Thank You for pointing it.
yes missed a zero at wrong position 🙂
The selling can only happen when there are buyers.
But if there is a large disparity with seller and buyer the stock price of Tata will go down.
This ideally will not affect the business that its doing. But it will dampen the debt if they are looking for fresh loan with pledging of shares.
The general Assumption is in long term the market is rational.
Dear sir ,
Would you plz make me understand the below lines more clearly..
“””But if there is a large disparity with seller and buyer the stock price of Tata will go down( PLZ make me understand this line with some example)””
But it will dampen the debt if they are looking for fresh loan with pledging of shares (HOWwill it dampen the the debt…..) .
Case 1: Assume the Tata share price is Rs100. And they are looking for loan of 10 lakh with Equity as collateral. So a bank comes in as see that the price of stock is 100 and they are ready to give convertable collateral of 1000 shares.
Hence bank will give the loan with just 1000 shares of equity pledged.
Case2: Assume the Tata price is Rs20 and Loan needed 10 Lakh. Now they need to give 5000 shares as collateral to get the same amount of loan.
Hope that give clearer picture
“””But if there is a large disparity with seller and buyer the stock price of Tata will go down( PLZ make me understand this line with some example)””
The stock price of any company is based on demand and supply. It is always about how many buyer against how many sellers.
Assume tata share at 100
there are 1000 buy orders and there is only 50 sell orders.it means many are ready to buy but very few ready to sell.This will move the bidding of the buy order. People will start asking tata shares for 110 and the stock price will move according to it.
Same if revered ie more sellers than buyers then it will pull down the stock price
woooooooooh man you are great your both the Answers are correctly explained with examples.
I am sure you must be an professor of IIM or Harvard.
Thanks i am just another Noob here trying to learn
I think there is an slight mistake instead of 1000 it must be 10,000 and instead of 5000 it must be 50,000.
Dear sir ,
Would you plz make me understand the below lines more clearly..
“””But if there is a large disparity with seller and buyer the stock price of Tata will go down( PLZ make me understand this line with some example)””
But it will dampen the debt if they are looking for fresh loan with pledging of shares (HOWwill it dampen the the debt…..) .
as i understand TATA as promoter does not loss or benefit due to any situation you stated. only the gain or loss is notional , and not real.