The stock’s daily price change is only ±10%, so why does block trading occur at a 20% discount?

Compared to regular trading—such as call auction and continuous auction—block trading is undoubtedly a more opaque trading mechanism. Although block trade data is publicly disclosed, only the broker seats of the two counterparties are revealed. Moreover, block trades typically involve sums running into several million yuan—or even hundreds of millions. Given their massive scale and frequent occurrence of premiums or discounts, it’s natural for people to ask: “Why would a stock with just a ±10% intraday price movement be traded at a 20% discount on the same day?” Of course, we must not overlook certain objective factors. From the seller’s perspective, some shareholders or institutions may urgently need cash—for debt repayment, investment in other projects, etc.—and thus require rapid monetization of their shares. Even at a 20% discount, completing the transaction swiftly and recouping funds remains acceptable to them. For instance, when major shareholders reduce holdings of restricted shares—whose original acquisition cost is often low—they can still realize substantial profits despite steep discounts. Meanwhile, buyers naturally demand a discount as compensation for liquidity risk—hedging against potential difficulties and price volatility when subsequently selling those shares. From the buyer’s perspective, some investors may view the 20% discount relative to the prevailing market price as an attractive entry point, believing the stock retains solid long-term investment value—given the company’s sound fundamentals and promising growth prospects—and thus willingly acquire shares at a discount via block trading to lower their average holding cost.

Practical insight: Prefer overpaying for high-valuation stocks with certain growth, rather than buying low-valuation stocks with uncertain growth at a discount.

We are most likely to encounter three scenarios: (i) continued multiple expansion, (ii) stable valuation, and (iii) multiple contraction. The first scenario is most favorable for our existing positions. Yet we must set aside the illusion of paper gains and broaden our perspective—looking beyond our own backyard. Let the bullet fly freely through the air; let the fish swim exuberantly amid the foam; let the bubble soar across the horizon. The second scenario offers the greatest peace of mind for holding. The foundational principle of investing is equity-oriented thinking: buying stocks is essentially acquiring ownership stakes in a business. When the business thrives, success follows naturally—we confidently hold onto our excellent enterprise, assured that no one will snatch it away, and steadily reap the compounding magic of time—future earnings amplified by the leverage of duration. The third scenario presents the best opportunity to increase our position. If multiple contraction occurs *in isolation*, without any other risks, we should laugh heartily—or even chuckle quietly. This truly is a once-in-a-lifetime opportunity! We must endure short-term losses and boldly catch golden raindrops from the sky with large buckets—steadily accumulating more ownership stakes in our business. Among these three scenarios, if any qualifies as a risk, it is perhaps only the third—multiple contraction—relative to the other two. While it may incur short-term opportunity costs in terms of capital timing, its long-term benefits far outweigh those of the first two scenarios. So—is this truly a risk, or rather an opportunity? 02 Low Valuation but Extremely Uncertain Growth Prospects Subpar assets always have basements beneath basements. Unless catalyzed by mergers & acquisitions or heavy policy tailwinds triggering a turnaround, such assets merely offer rough, speculative discounts on projected earnings—perhaps for one to two years, or even three to five years ahead. We all know cheap goods are everywhere. If we cannot tolerate the psychological discomfort of bargain-hunting, the issue extends beyond merely securing high dividend yields—it evolves into confronting ever-rising dividend yields. So what do we gain by buying discounted, low-quality assets? We are most likely to face only one scenario: multiple contraction. Why does buying discounted, low-valuation stocks eliminate the first two appealing scenarios? Because low valuation itself signals the market’s pessimism about the company’s ability to sustain or enhance future performance—unless driven solely by extreme bear-market sentiment. Otherwise, market professionals’ collective judgment on the company’s fundamental trajectory tends to be remarkably accurate. There exists a theory in markets called mean reversion. Whenever anyone feels divinely inspired, they invoke it—to reassure others or themselves: “Trust mean reversion; value may be late, but never absent.”

Alto Ingredients Trades at a Discount Despite 344% Rally in a Year: What's Next?

Jul 16, 2026

Alto Ingredients Inc shares surged 344% over the past year due to improved profitability and Section 45Z tax credits, maintaining an attractive valuation despite risks from commodity price volatility.