Blockage Discount

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Blockage Discount

A discount that an institutional investor applies to a block trade with another institutional investor. That is, if an institutional investor wishes to divest itself of all or most of its holding in a security, it may apply a blockage discount to sell it more quickly. This has the added advantage of not causing a crash in the price of the security because of increased trading volume because the blockage discount causes a trade below the market price.
References in periodicals archive ?
Also, the IRS has challenged blockage discounts applied by taxpayers to collections of artworks,
Since that decision in 1975, the Service or the Tax Court has recognized blockage discounts of artworks for gift tax purposes (Calder v.
1504-4(b)(2)(iii) provides that, for purposes of the 80-percent of value test generally (as well as in the case of options treated as exercised), all shares of stock within a single class are considered to have the same value and, hence, control premiums and minority and blockage discounts within a single class are not to be taken into account.
Although TEI appreciates the desire to craft a rule that is comparatively easy to administer, we question whether the wholesale disregard of control premiums and minority and blockage discounts is supported by sections 1504(a)(2)(B) and 1504(a)(5)(B).
Emory Business Valuation provides independent valuation services for businesses and individuals needing appraisals of estates, gifts, employee stock ownership plans, stock options, voting trusts, buy/sell agreements, blockage discounts, corporate planning, sales of businesses, mergers, spin-offs, partnerships, limited liability companies, divorces, nuptial agreements, holding companies and other transactions.