Eicher Motors tanks on stake sale

Eicher Motors is amongst the top five losers on the bourses. On the BSE, intra day it went down over 4.5% at Rs.18826 and though it has recovered from there, it is now at Rs.19027 levels, down some 4%.

The stock has tanked on news that the promoters have sold 4.2% stake in the company for Rs.2100 crore. Post this, they continue to hold 50.67% stake.

Why did they sell stake? The promoters needed some liquidity and stake was sold to raise money for meeting some of their personal needs.

Though the promoters have assured that they intend to maintain a majority stake and do not plan to sell any more shares in the foreseeable future, the market is spooked. We in our own lives, sell shares to raise money for meeting personal needs. But then we are not owners of the company where we sell shares. Thus when owners sell, it raises a fear mainly of major liquidity crisis on the part of the promoters. This is like selling your own heirlooms and ancestral gold – no one sells unless dire straits.

Hopefully with the promoters assuring of no more sale, the stock will once back once the fear factor dissipates.