Block Trade vs. Accelerated Bookbuild

Step 1: Stake Size and Value at Market

Shares Sold = Shares Outstanding × Sponsor Stake %

Shares Sold = 200.0m × 22.0% (0.22) = 44.0m shares

Market Value of Stake = 44.0m × €45.00 = €1,980.0m

This is the theoretical value of the position if every share could be sold at the last close, which is precisely what a seller of this size cannot do. Everything that follows measures how much of that €1,980.0m the sponsor gives up in exchange for getting out of the position at all, and how quickly.

Step 2: Placement Price per Execution Route

Placement Price = Current Share Price × (1 − Discount to Last Close)

The placement discount is the price concession that persuades new investors to absorb a block of stock they did not ask for, and it widens the less time the market is given to digest the supply. A fully marketed deal has a roadshow and a published prospectus behind it, so demand is built before the price is struck; an ABB is launched after the close and priced by breakfast; a bought deal is priced in a single conversation with the bank, which is why it sits at the wide end.

Step 3: Gross Proceeds per Execution Route

Gross Proceeds = Shares Sold × Placement Price

Gross proceeds are what the book raises before the syndicate takes its cut, and on its own the number is misleading: it flatters whichever route happens to carry the highest fee. Analysts who stop here systematically over-rate the fully marketed offering.

Step 4: Net Proceeds to the Seller

Net Proceeds = Gross Proceeds × (1 − Underwriting Fee)

The fee scale inverts the discount scale, and that is not a coincidence: the fully marketed deal is expensive because the bank spends four weeks selling it, while the bought deal shows no fee at all because the bank is not being paid a commission — it is buying the stock at €41.40 and taking the entire position onto its own balance sheet in the hope of reselling it higher. In a bought deal the bank's compensation is the discount.

Step 5: All-In Cost of Execution

All-In Cost = (Market Value of Stake − Net Proceeds) / Market Value of Stake

Using the €1,980.0m market value from Step 1 and the net proceeds from Step 4:

Ranked purely on money, the fully marketed offering wins by €10.3m over the ABB (52 basis points) and by €35.9m over the bought deal (233 basis points). But the ranking on money is the reverse of the ranking on risk: the fully marketed seller carries four weeks of market exposure on a €1,980.0m position and can still see the deal repriced or pulled, the ABB seller carries roughly twelve hours of exposure and does not know the clearing price until books close, and the bought-deal seller carries none at all because the price is fixed the moment the trade is signed. The €35.9m gap between the ABB and the bought deal is the explicit price of that certainty.

Step 6: The Open-Market Alternative

ADV Multiple = Shares Sold / Average Daily Trading Volume

ADV Multiple = 44.0m / 0.8m = 55.0x ADV

Days to Sell in the Open Market = Shares Sold / (Average Daily Trading Volume × Maximum Daily Participation)

Using the 20.0% (0.20) maximum participation assumption:

Days = 44.0m / (0.8m × 0.20) = 44.0m / 0.16m = 275 trading days

At 252 trading days per year, that is roughly 1.1 years of continuous selling.

The ADV multiple is the single number that explains why block trades exist. A stake worth 55.0x the stock's daily turnover cannot be liquidated in the market: the sponsor would spend more than a year visibly selling, the overhang would depress the price throughout, and the eventual realised price would almost certainly be worse than an 8.0% one-off discount. Desks generally treat anything above roughly 10x to 15x ADV as block territory, and this stake is several times that.

Final Results

• Shares to be placed: 44.0m, worth €1,980.0m and equal to 55.0x ADV
• Net proceeds — fully marketed secondary: €1,867.8m (all-in cost 5.67%, 4 weeks of market risk)
• Net proceeds — accelerated bookbuild: €1,857.5m (all-in cost 6.19%, overnight)
• Net proceeds — bought-deal block trade: €1,821.6m (all-in cost 8.00%, price fixed at signing)
• Open-market drip-feed alternative: ~275 trading days

Read together, the numbers give the standard answer to "who uses which": a financial sponsor unwinding a position at the end of a fund's life, or any seller with a hard deadline, pays up for the ABB or the bought deal because certainty of execution is worth more than 50 to 230 basis points; a corporate divesting a non-core stake with no deadline, or an issuer raising primary capital that has to be explained to the market, takes the fully marketed route and keeps the cheaper economics. The net proceeds figure then flows straight into the sponsor's exit multiple of money and IRR, which is where the decision is ultimately judged.

Would you like to extend the analysis to a partial sale — for instance placing 12% now and retaining 10% behind a 90-day lock-up — and see how the retained stake changes both the discount the book demands and the sponsor's residual market risk?