If an uber-rich person, say the CEO of certain online retail company or the ex CEO of certain Redmond based technology company suddenly were to sell ALL of their shares, would it be possible to estimate how much the stock price would change based on the huge surplus in supply?


You could speculate about the size of the price change but it would be no more than an inaccurate guess.

The buy side size and depth would be listed in the order book. That would be the starting point of how much stock offered by buyers that has to be taken out. The problem with that assumption is that there are many hidden orders. Such orders display only a portion of the size that the buyers are after (iceberg orders).

The second problem is that as price drops due to 'Redmond selling', new orders would enter the market to buy at lower prices. There's no way to estimate how many of those will occur.

Last of all, the rate of selling affects the speed of descent. Dumb money places a huge order and price gaps. A smart seller, disguises intent and sells at a slower rate, one at which the buyers can absorb without driving price down quickly.

  • 1
    Likely not only robots wanting that juicy arbitrage but even regular daytraders would join in on such a frenzy. Since the CEO is most assuredly an insider, they would have no choice to alert the market to their intent, so disguise and individual orders would be of little use. May 5 '20 at 14:52
  • There's a lag between insider purchases and sales and the filing. May 5 '20 at 19:37

Once word gets out that a key member of a large company is selling their shares, then it doesn't matter if they were selling slow or selling fast. The news of the sales will be what drives the market.

Because of SEC regulations even if they are able to discretely sell a significant number of shares without being noticed, when they file the required SEC paperwork, it will be noticed and then things could get interesting.

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