Two words: margin call. When you borrow against your stock you can be forced by the bank to sell shares to pay back your loans. If you’ve borrowed a ton of money against a large percentage of shares and the share price goes down a bit, a margin call forcing you to sell shares can send the stock crashing down.
This happened to Green Mountain Coffee Roasters (creator of the Keurig) founder Robert P Stiller and it cost him his job as chairman.
They don’t have to sell though, they can borrow against their stock and many do.
Two words: margin call. When you borrow against your stock you can be forced by the bank to sell shares to pay back your loans. If you’ve borrowed a ton of money against a large percentage of shares and the share price goes down a bit, a margin call forcing you to sell shares can send the stock crashing down.
This happened to Green Mountain Coffee Roasters (creator of the Keurig) founder Robert P Stiller and it cost him his job as chairman.