The IPO of Dentsu, the world’s fourth-largest advertising company, was supposed to mark UBS Warburg (Japan)’s entrance as a serious name in underwriting in the Japanese market.
Unfortunately within two minutes of Dentsu being floated on the Tokyo Stock Exchange it had turned into UBS’s pre-Christmas nightmare. The bank’s name had become a joke, it had lost a significant chunk of its profits for the year, and had a client that in the future was likely to strike it off a lot more than its Christmas card list.
Just before Dentsu was about to make its debut on the TSE, a trader or, according to rumours, a desk assistant, keyed in an order to sell 610,000 Dentsu shares at ¥16 ($0.12). The problem was that he was supposed to have sold 16 shares at ¥610,000 ($4,709). At 9am, when the market opened, the mistake was immediately noticed and, according to one source, UBS’s trading floor went absolutely ballistic.
The order was cancelled by 9.02am, but not before the banks’ computers had kicked in and sold 65,000 shares, or nearly half of all the stock sold in the IPO. Dentsu’s price fell to ¥405,000, down from its opening price of ¥420,000. By close of business, UBS had only managed to claw back 18,339 shares at ¥470,000.
The final amount that this could cost UBS is unclear, but it could be the most expensive typing error in TSE history. The bank is estimated to be facing losses of $50 million though some sources think it could be looking at up to $100 million. UBS declines to comment on the incident.
The culprit has so far not been named, but as one banker at UBS says: “I don’t think I really want to know who it is. I wouldn’t be able to ever look them in the face again.” That may well have something to do with the fact that the bonuses are not likely to be quite as promising as they were expected to be.
Bankers speculate that the bonus pool will be used to buy back the rest of Dentsu’s mistakenly sold shares so UBS can actually deliver the stock to investors who bought it. “This will be the quickest ever transfer of bonuses from one company to another,” laughs one banker from a competitor.
