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Stock Crashes 38% in Minutes After Stunned Trader’s $415 Million Blunder

Last Updated September 23, 2020 12:49 PM
David Hundeyin
Last Updated September 23, 2020 12:49 PM

No matter how meticulous you are, there’s a solid chance you’ll make a mistake on the job before you clock out this evening. Take comfort in the fact that this blunder won’t single-handedly ignite a historic stock price crash, because that’s exactly what happened to one unfortunate trader in the Philippines today.

A Single Trade Erased Nearly $415 Million from This Stock

Shares of Cebu Air, the largest budget airline in the Philippines, plunged by 38% in minutes today after a trader accidentally placed an incorrect order. The error, which occurred at the worst possible time – during the exchange’s no-cancel period – caused the company’s market cap to dive by a stunning  $413 million.

stock crashes 38% after fat finger error
One mistake wiped more than $400 million off this company’s market cap. | Source: Bloomberg

A representative at Quality Investment & Securities Corp, the brokerage which executed the order, confirmed to Bloomberg  that an errant trade was to blame.

“It was a trader error, our brokerage wasn’t meaning to sell Cebu Air shares.”

CEO of Cebu Air Lance Gokongwei expressed confidence that the stock will be back up by tomorrow, saying that the trade was most likely a “fat-finger trade.”

The Long and (Sometimes) Hilarious History of ‘Fat Finger’ Trades

This is not the first time a broker’s blunder ignited a dramatic stock market swing.

One of the largest fat-fingers in history occurred in 2014 when Japan’s stock market was unexpectedly flooded with $711 billion in orders for blue-chip companies like Toyota and Honda. Luckily, the trades were canceled prior to execution.

And don’t forget infamous trader Stephen Perkins, who got drunk and then executed $520 million worth of trades , single-handedly moving the global price of oil to an eight-month high.

More recently, in October 2018, a fat-finger trade resulted in over 2.8 billion shares of South Korean industrial giant Samsung being sent to its workers. The shares were then worth over $100 billion, and some staff reportedly sold off those shares immediately, trousering a very healthy sum in the process.

One month later, CCN.com reported that Storebrand , a leading Norwegian financial services group worth more than $3 billion, shed 14 percent of its share value in a single morning trading session after falling victim to a fat-finger.

On some very rare occasions, a fat-finger error can favor the trader, which is what happened when rookie French trader Harouna Traoré  mistakenly racked up a 1 million euro loss and kept trading because he did not know he was trading live. After realizing that the trades were real, he figured he had nothing to lose, so he pushed on and kept trading, eventually turning his losses into a profit position of 10 million euros ($11.6 million).