In financial markets, Overhang refers to a large block of securities that the market knows or suspects will be sold in the near future, creating downward pressure on the asset's price. For instance, a major private equity investor or promoter holding a significant stake may create an overhang if the market anticipates an upcoming block deal or stake sale. Similarly, a large number of unexercised stock options (employee stock overhang) can dilute existing shareholders when exercised. Identifying potential overhangs is key to understanding near-term price dynamics.
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