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I'm asking about the specific mechanics of how these large-scale trades are done. Could it be done by setting a limit buy for 150,000,000 shares of AXP on your regular brokerage and just waiting to collect them all, or is there some other way? Would you need to have millions/billions of free cash reserve floating in a money market fund to do this? I assume he's not using anything regular investors have access to, is that correct?

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Large orders can be executed in various ways. For a large order but not the size of a Buffett order that you are referring to, it could be accomplished with a hidden order. Large purchases or sales can be executed by an investment bank's block trading desk to find the other side of the trade (pension funds, hedge funds, other investors with large positions, etc). Large institutional block orders are often handled in hidden dark pools not available to the public. These transactions occur within NBBO so as not to move price. Such accumulation can take days or weeks to achieve.

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    This is fundamentally wrong.
    – TomTom
    Commented Jun 3, 2020 at 9:34
  • @TomTom care to elaborate?
    – Najel
    Commented Jun 3, 2020 at 13:04
  • This is like saying that someone who wants to buy a lare percentage of a farm's output will do so by going to a supermarket. The FLOAT of many traded companeis (i.e. shares that are traded on an exchange) ois often not higher than 20% or 25% - how can you make a large percentage investment then.
    – TomTom
    Commented Jun 3, 2020 at 17:33
  • @TomTom isn't that exactly what he said: "Large institutional block orders are often handled in hidden dark pools not available to the public." Commented Jun 3, 2020 at 17:42
  • Nope. See, dark pools do not magically have access to more than the float. If. i.e. I would want to get 20% of microsoft, I either make a public tender or negotiate with funds OFF EXCHANGE.
    – TomTom
    Commented Jun 3, 2020 at 17:44
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There are various ways, but generally: they do not do that on exchanges. If you try to take over a company or make a large investment, those are prearranged deals that are done off the exchange. They go on the ticker as reported, but not traded.

i.e. Buffet may invest in Company X getting 20% of the shares. Those will either be purchase from large investors (where you actually sit on a table and talk contract) or new shares - in which case again this is negotiated.

You do NOT want to interrupt the flow of the floating shares and you do want to talk terms which often are way more than the price.

Going through the exchange would basically be a hostile takeover bid - and this turn nasty VERY fast and people start bidding the price up.

I assume he's not using anything regular investors have access to, is that correct?

This is wrong and correct. It is correct as in normal investors simply are not able toe buy a large percentage of any traded company - they simply lack the funds. It is incorrect in that there is nothing special about negotiating a deal, it is just that your small account is not worthy any attention of ANY company that is not totally bankrupt. Same like in many other things, those with larger size have advantages ;) And in "real" money, 100 million is small change.

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Berkshire Hathaway has used the mechanism of a public tender offer more than once.

In general in a tender offer, there are a couple of components: the price per share, typically higher than the current market rate; the date range that the offer is open for; and the contingency of a sufficient level of interest, otherwise the deal does not occur. That is, it's worthwhile to offer a premium to attempt to gain 51% of voting shares and take over the company, but perhaps not to pay a premium to end up with a large minority stake.

Usually when a tender offer is made, the market price moves close to the tender price (since there's a high expectation of a floor on the price), though there is still some volatility as there is a chance the contingency is not met, or other investors may now pay attention and decide the company is undervalued and bid the price over the tender offer, potentially in an attempt to get the acquiring company to increase the price offered in the tender.

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