Yesterday afternoon, Thomson Reuters announced that it was repurchasing 6.5 million shares of stock in privately arranged transactions as part of its efforts to repurchase approximately 37 million shares through May 2017. As part of the disclosure, Thomson Reuters noted that the privately arranged transactions will occur at prices that are discounted from the quoted market value. You might wonder: Why would these transactions occur below market value rather at market value?
The short answer: It is all about liquidity.
If someone wants to sell 6 million shares of Thomson Reuters on September 26th, the creation of a single sell order would flood the market and drag down the price of the stock immediately. Any sale would have to be spaced out over months (sometimes even years) so that you don’t compete against yourself in the marketplace.
What Thomas Reuters the corporation is doing here is providing large investors the … Read the rest of this article!