Supplementary pledge in stocks means that the stocks of a listed company are pledged by shareholders. When the pledge exceeds the warning value of the guarantee, the company needs to supplement the pledge. So it’s clear at a glance whether supplemental staking is good or bad, which is usually not a good thing.

It is very common for listed companies to pledge equity. This is also a financing method. For companies with business operation problems or cash flow compensation, this is a means to quickly obtain funds. Once the pledge period expires and cannot be repaid, the equity will be sold to a bank or trust company. On the other hand, it sometimes becomes a way for major shareholders to reduce their holdings and realize cash. During the pledge period, if the company's stock price drops significantly, this part of the assets will depreciate, which is the same as the futures warehouse receipt being made incorrectly during futures trading. Therefore, it is necessary to increase the value of the pledge, just like in futures trading. The same goes for raising margins in futures trading. Once the major shareholders are unable to make replenishments, it will be like liquidating their positions and losing their ownership rights to shareholders. The analysis of equity pledges should be analyzed specifically in different markets. In the bull market, many companies that pledged equity used their funds for securities investment.

Fund liquidity in the market can be supplemented through equity pledge. When making a specific pledge, there will definitely be a discount for obtaining financing funds. For example, if you are financing 10 million from a bank, the equity value that needs to be provided must be above 20 million, usually with a discount of 30% - Varies from 60%. A listed company needs 10 million in capital, and if the discount rate is 50% off when conducting equity financing, then only 5 million will be obtained. If the company's stock rises, then everyone is fine; once the stock price falls, in order to ensure the bank's interests, a liquidation line will be set at this time, usually the early warning line is 160% or 140%; and the liquidation line is 150% Or 130%. We calculate based on the warning line being 160% and the closing line being 130%. Then the early warning position is 10 million * 0.5 * 160% = 8 million, which means that it will prompt when the stock price drops by 20%; then the liquidation position is 10 million * 0.5 * 130% = 6.5 million, which means that the stock price will be forced if the stock price drops by 30%. Close the position to protect the principal. Of course, the pledging party does not want to forcefully liquidate the position. This is when it is time to replenish the pledge. If the stock price continues to fall at this time, shareholders will need to cover their positions or close their positions. At this point we can better understand whether supplementary staking is good or bad. It is really dangerous not to tell the truth when encountering a bear market. To learn more about listed companies click: Financial Analysis of Listed Companies.