Insook:
I agree with you that it is very common, which is one of the reasons that I posted my comment. Many investors don't realize that there are many back doors available through which stock can be eased out.
The practice can also have rather interesting and dire unseen results. By way of example, an acquaintance of mine, a former director and very large share holder of a large Canadian company, used his large stock holding as collateral to back a loan for an extremely expensive "toy purchase" (in the millions of dollars). While never actually mentioned, I got the impression that initially at least, he was not at all unhappy when the stock price fell off a bit, and the bank called for more security and threatened to sell. Not able (or inclined) to provide the needed additional security, the bank proceeded to "hit the bids" with a gusto. Unfortunately, a bit of bad news emanated from the company, the stock came under increased selling pressure, the bank then REALLY smacked all bids, driving the stock into a free-fall condition. It didn't help things when it got out that the selling was coming from an insider with a loan problem. In the end, the stock fell an amazing amount, my acquaintance moved from financial independence to financial distress and many innocents got hammered. Not that I think anything like this might happen to MU. (g)
Best, Earlie |
