Japanese brokerage Mizuho Securities scrambled yesterday to clean up the mess left by a trader who mistakenly offered tens of thousands of shares for 1 yen apiece, costing the firm at least 27 billion yen (€190 million).
Admitting to the massive error, the brokerage unit of Mizuho Financial Group said the trader entered what was intended to be an order to sell one share of J-Com - a staffing firm that made its market debut on Thursday morning - for 610,000 yen.
Instead, 610,000 shares, valued at $3.1 billion at J-Com's IPO price, were offered for 1 yen each.
The order represented more than 40 times the number of J-Com's outstanding shares, which have a total market value of 11.2 billion yen.
No buyer was able to pick up the phantom shares for 1 yen due to market rules designed to limit price fluctuations, but the shares may have gone as cheaply as 572,000 yen each, a more than 9 per cent discount to the intended sale price. Mizuho Securities president Makoto Fukuda said the brokerage had bought back most of the shares it sold. It is believed to be negotiating to buy back more shares although buyers are likely to hold out for a hefty premium.
One of many winners in the affair may be US investment bank Morgan Stanley, which bought about 4,500 J-Com shares on Thursday. That purchase is equivalent to 31.2 per cent of J-Com's outstanding shares, but less than 1 per cent of the shares mistakenly offered by Mizuho. Other investors may also report big theoretical stakes in J-Com in the coming days, in accordance with rules requiring disclosure of stakes of more than 5 per cent.
Mizuho's error has so far cost the broker some 27 billion yen, Mr Fukuda estimated, which could rise to more than 30 billion yen once the buy back is completed.The loss would almost match Mizuho Securities' group net profit of 28.1 billion yen for the financial year ended in March, though Mr Fukuda said the incident would not threaten the brokerage's financial stability.
The Tokyo Stock Exchange said it was the first time an errant order had exceeded the number of outstanding shares. Under exchange rules the order could not be cancelled, and there were no plans to change the December 13th settlement date for J-Com shares traded on Thursday, it said.
