3 ms·

A bit off topic, but when you buy that many shares of a public company can you negotiate a discount? Is the trade done directly with Apple, or does Berkshire Ha

A bit off topic, but when you buy that many shares of a public company can you negotiate a discount? Is the trade done directly with Apple, or does Berkshire Hathaway just buy it through Nasdaq ?

lujim 10y ago
Let's say you are a private company and want to raise money. Instead of taking on debt you decide to sell some of your business. You will go through an investment bank who will help you quantify the value of your business and underwrite/distribute shares of it to the public. This is the primary market where new shares are created. After that happens market participants can sell those shares to each other based on supply and demand. As demand for a companies shares rise, prices rise and vice versa. The secondary market is what you and I as individuals think of when we talk about buying and selling stocks. There is no real discount that Apple could offer Berkshire because they aren't selling the shares, market participants are (individual investors, brokers etc). The trade would take place as a complex series of transactions on a variety of exchanges. Sometimes Nasdaq, but other times on exchanges like ArcaEdge, Bats, Direct Edge, NYSE and others. The complexity is that if you dump 1 Billion dollars into the market to buy x number of shares of AAPL you will drastically increase demand and move the price considerably, so the trade must be executed as a series of transactions over a given time period. Now if one public company buys another public company in a merger there is a set share price that is negotiated but that's outside of the normal process of buying and selling stocks.
rdancer 10y ago
If AAPL were interested in selling more shares (their cash reserves growth indicates they don't), they would usually sell the whole bunch of them at once, either to one investment bank, or a consortium (who then resell it on the open market). So yes, Berkshire is buying a lot, so instead of selling to Goldman Sachs, Apple may sell to them. It all comes down to whether both Apple and Berkshire can agree on a price and cash flow that is better than buying/selling on the open market. This would probably not be a great discount for the buyer. Other companies would probably still ask Goldman to broker the sale (at a lower fee) and take care of regulatory compliance, but both AAPL and BRK like to maintain in-depth knowledge of the intricacies of the stock market in-house, so they may just do everything themselves.

A bit off topic, but when you buy that many shares of a public company can you negotiate a discount? Is the trade done directly with Apple, or does Berkshire Hathaway just buy it through Nasdaq ?

lujim 10y ago

Let's say you are a private company and want to raise money. Instead of taking on debt you decide to sell some of your business. You will go through an investment bank who will help you quantify the value of your business and underwrite/distribute shares of it to the public. This is the primary market where new shares are created. After that happens market participants can sell those shares to each other based on supply and demand. As demand for a companies shares rise, prices rise and vice versa. The secondary market is what you and I as individuals think of when we talk about buying and selling stocks. There is no real discount that Apple could offer Berkshire because they aren't selling the shares, market participants are (individual investors, brokers etc). The trade would take place as a complex series of transactions on a variety of exchanges. Sometimes Nasdaq, but other times on exchanges like ArcaEdge, Bats, Direct Edge, NYSE and others. The complexity is that if you dump 1 Billion dollars into the market to buy x number of shares of AAPL you will drastically increase demand and move the price considerably, so the trade must be executed as a series of transactions over a given time period. Now if one public company buys another public company in a merger there is a set share price that is negotiated but that's outside of the normal process of buying and selling stocks.

rdancer 10y ago

If AAPL were interested in selling more shares (their cash reserves growth indicates they don't), they would usually sell the whole bunch of them at once, either to one investment bank, or a consortium (who then resell it on the open market). So yes, Berkshire is buying a lot, so instead of selling to Goldman Sachs, Apple may sell to them. It all comes down to whether both Apple and Berkshire can agree on a price and cash flow that is better than buying/selling on the open market. This would probably not be a great discount for the buyer. Other companies would probably still ask Goldman to broker the sale (at a lower fee) and take care of regulatory compliance, but both AAPL and BRK like to maintain in-depth knowledge of the intricacies of the stock market in-house, so they may just do everything themselves.