Blockholder (shareholder) - Explained
What is a Blockholder of Shares?
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Table of ContentsWhat is a Blockholder of Shares?Why is being a Blockholder Important? Blockholders as Activist Investors Academic Research on Share Blockholders
What is a Blockholder of Shares?
A shareholder that is powerful as a result of the large amount or value of a companys stock or bonds he possesses is a blockholder. Influential shareholders who own exceptionally large amount of a companys stocks and bonds are called blockholders. Usually, an investor that holds approximately 10,000 shares or then than $200,000 is referred to as a blocholder or an institutional investor. However, there is no gauge for the number of stocks or bonds that an investor must hold before he can be called a blockholder.
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Why is being a Blockholder Important?
Generally, through constant and informed monitoring of stock trading in the open marker, companies become aware of the number of stocks owned by shareholders. Companies become officially aware of the presence of blockholders among their shareholders through a Form 13D. A Form 13D is filled with the Securities Exchange Commission by the shareholder notifying the commission of the number of stocks they own or when they have a 5% block ownership of the company.
The issuance of preferred stocks by companies is motivated by the need to raise additional funds or build a defense mechanism in situations of hostile bidding. Preferred stocks come with some voting rights that shareholders are entitled to when it comes to making important decisions in the company. A shareholder who is blockholder enjoy influential and increased voting rights in the company.
Blockholders as Activist Investors
An investor who has an ownership block that has reached 5% or more of a company's outstanding shares and exercises that interest to control company decision making is an activist investor. Activist investors buy large number of a company's stocks or shares with the goal of lobbying for seats on the company's board or advocating a major change in the company. Through open letter to the management of a company, activist investors make their positions known, they petition for seats on the company's board in order to initiate a change or be a part of the decision making body. Blockholder's and activist investors are important in terms of boosting a company's share price trading. Blockholders are however different from activist investors, examples of influential blockholders are Starboard Value, Warren Buffett, among others.
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