A lesson in how not to lose $40 billion in stock overnight

A trader pauses at his desk ahead of the closing bell on the floor of the New York Stock Exchange (NYSE), January 22, 2019 in New York City. Source: Drew Angerer / Getty Images North America / AFP

By Emma Richards | 28th January 2019

LOSING over US$40 billion from a company’s market value almost instantaneously is not something most of us will have to deal with throughout our professional lives, but that’s exactly what Hong Kong-British conglomerate Jardine Matheson experienced on Thursday as they saw an 83 percent drop in share price overnight.

Shares of the centuries-old conglomerate plummeted in pre-market trading on the Singapore Exchange but fully recovered to end the session trading higher than when the day started.

The firm blamed the stark anomaly on an electronic error, a mistake put into the system, informally known as “a fat finger.”

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In a financial system as fast-paced as the one today, mistakes are still bound to happen. And they do, sometimes with wildly expensive consequences.

To highlight the problem, Bloomberg compiled a list of some of the worst stock shocks in recent years to remind us, no matter how sophisticated a system, errors can still occur.

Jardine Matheson’s market value plummeted 83 percent in one day, only to recover before the end of the session. Source: Google

Near death for Samsung

The cost of human error couldn’t be more evident in this example. An employee at Samsung Securities Co. was supposed to pay 1,000 won (93 cents at the time) per share to employees as part of a company compensation plan. This gesture soon turned into calamity as the worker instead gave 1,000 company shares, bringing the total bill to about US$100.3 billion – that’s more than 30 times the company’s market value.

Some smart and quick moving employees saw an opportunity and sold the shares before Samsung had time to do anything about it. This saw “a rout of as much as 12 percent in the space of minutes on April 6, the biggest decline since the global financial crisis,” Bloomberg said.

A model poses with a Samsung Electronics Co.’s Galaxy S6, right, and Galaxy S6 Edge, left, smartphones during its launch event at company’s headquarter in Seoul, South Korea. Pic: AP

Typo tragedy

We all know the pain of typos, but no one more so than the poor guy at Mizuho Securities Co. responsible for losing US$345 million in market shares.

Rather than sell one share of employment agency J-Com Co. for JPY610,000 (US$5,556), as planned, the company sold 610,000 shares for JPY 1 each. Due to a problem with the Tokyo Stock Exchange’s computer system, the company was unable to rectify the problem and had to live with the consequences, along with stark warnings from Japan’s Financial Services Agency to improve its compliance.

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Gold digging

Gold futures fell as much as 1.6 percent on Comex in June 2017 following a huge surge in volume when trading jumped to 1.8 million ounces of gold in just a minute.

As Bloomberg points out, this was an amount bigger than the gold reserves of Finland at the time.

The blip was put down to a measurement mix-up. Rather than trade 18,149 ounces of gold, 100 times that amount was traded in 18,149 lots of a futures contract. But this mix-up is only a theory, and still no one is exactly sure what happened.

“No one has a clue, apart from the unfortunate individual that pressed the wrong button,” David Govett, head of precious metals trading at Marex Spectron Group in London, said at the time of the spike in volume.