This paper measures the effects on stock proces of corporate investments in 5% or more of another company's equity securities. Such investments initiate a process that may end with a takeover, targeted repurchase, takeover by a third party, or sale of the shares. The total valuation effect of the investment for acquiring and target firms includes returns at disclosure of the investment position, the outcome announcement, and related intervening events. For example, the positive return for target firms at initial disclosure of the investment more than offsets the negative return at a targeted repurchase.

This study does not support the view that a large number of shares can be sold at the prevailing market price and at a small cost. A significant stock price decrease is observed at the initial announcement of secondary distributions. The price declines are greater for offerings by officers and directors and for larger offerings, but are significant for all types of sellers and for large and small offerings. There is no significant price decline at the offering when secondaries are announced in advance. Underwriting and other selling costs are substantial and are positively related to relative offering size.