Beating The Gun

Finance a la shmoop.. what is a block trade? yeah you think this was the yellow Marvin [A monopoly board]

Gardens trio bartered for the green Pennsylvania Avenue set but it's not

instead a block trade happens when a huge, you know block yes clever naming

there of shares needs to get sold think company founder just got divorced and [Man and woman sitting on a sofa]

old husband wants the dough fast she just wants to get rid of him you know

lose 185 pounds so of her 28 million shares she or rather her bank or brokers

put together a group of a half a dozen buyers who then buy the stock in a clean [Stock is dusted]

block trade there's a strange paradigm here sometimes companies shares are

thinly traded or not liquid meaning that there isn't a ton of volume every day in

the stock and large institutions wanna buy in big like to the tune of 5 million [Big institutions buy stock]

shares but if they buy 50,000 shares a day in the market well they'll likely

move the stock from say 18 bucks a share to 25 bucks a share by the time they're

done buying so sometimes supply of block trades is constrained and the trade

usually with price negotiated well beforehand goes off at a premium to

where it was regularly trading like that eighteen dollar figure maybe implies a

block trade that happens at 20 bucks the seller is usually happy because if they

dump the shares at fifty thousand a day into the market while they'd likely [Dump truck dumps stocks on the floor]

drive down the stock price to fifteen dollars or less in the process got it?

and this way they got a $2 premium above that 18 bucks 20 minus eighteen two

dollars there yeah and the institution is happy because now they own the [Institution smiling]

however many millions of shares that they own at a twenty dollar base price

instead of something likely much higher if they've gone into the market and

bought em, so that's when supply is constrained in a thinly traded low

volume in demand stock much more common as a block trade where there's a whole

lot of supply coming on board and not nearly the demand of buyers or investors

to take over the stock so it trades at a meaningful discount to whatever price it

was trading at like in the eighteen dollar a share case well maybe that

block trade happens at 17.20 or 16.50 or

thereabout so that's a block trade and here's a blockhead yeah ask your parents [Blockhead figure appears]

if you don't get the reference here...