ShmoopTube

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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block trade happens at 17.20 or 16.50 or

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

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

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