A pledge is a forced seller
waiting for a bad week.
An owner borrows against his shares and keeps the keys, until the price slips. Then the lender's cover ratio, not the business, sets the floor. Each leg down pulls the next one closer.
| What the stock does |
Lender's cover on the loan |
| At the pledge | 2.00x |
| Down 10 percent | 1.80x |
| Down 20 percent | 1.60x |
| Down 30 percent . margin call | 1.40x |
| Down 40 percent | 1.20x |
Cross the lender's line, roughly 1.5x here, and the call goes out. Miss it and the lender dumps the pledged shares into the open market. That is fresh supply, supply drops the price, the drop trips the next call. SEBI makes the promoter flag a pledge within 2 working days, and the pledged column sits in every quarterly filing. Most people never open it.