Pyramiding

Pyramiding (1) Pledging shares with a banker or broker to raise a loan to buy more shares of the same company, pushing up their prices. These shares are pledged against to secure a further loan to buy additional shares of the same company in a self – feeding cycle, which is called pyramiding. In a bullish market this caused the prices to rise further and increase the operator’s profit. In a bear market this causes margin calls and substantial losses. (2) The snowballing phenomenon resulting from a holding company acquiring more and more subsidiaries. (3) Fraudulent investment, schemes offering very high interest to depositors from non – existent earnings, paying them out of fresh deposits from gullible investors until such time as the scheme collapses. Such schemes are called Pyramid Schemes.

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