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DRB-HICOM CE holders need a hero
by hlk Sat 30 Jul 2011, 09:47
Calling SC! Calling Bursa! I need a hero! He's gotta be strong, he's gotta be fast and he's gotta be fresh from the fight.
Alright, give me a break. I pinched those lines from a Bonnie Tyler song, and I don't need a hero, especially if it is a him.
The DRB-HICOM CE call warrant holders, however, probably need a hero badly, having been taken to the sewers due to one trading mistake.
On Monday, something dramatic happened to the DRB-HICOM mother share, when instructions to buy three million DRB-HICOM shares at RM1.95 a piece was wrongly keyed in as a sell order.
According to news reports, the error, which happened at about 4.50pm, saw three million shares transacted at RM1.95 until the closing bell.
By the way, at 4.48pm DRB-HICOM was trading at RM2.28 a share, making the lucky buyer's bid more than 30 bids lower than the actual value of the DRB-HICOM shares at that point of time.
This trading error cost the DRB-HICOM CE holders big time. The call warrants expire on August 1 with the settlement price based on the last five days' closing price.
As one commenter in a finance blog pointed out, since one of the five closing prices was pressed to RM1.95, even if the other 4 remaining closing prices are RM2.24, the settlement price will be only RM2.18, and the CE will be worth only 11.5 sen, as opposed to 14.5 sen if the five average closing price was RM2.24.
To make matters worse, the exercise price for the CE call warrants is RM1.95, and that set tongues wagging.
To set the record straight, OSK Investment Bank Bhd, the issuer of the now infamous call warrant, promptly issued a statement.
OSK said it was not involved in the substantial decline in DRB-HICOM, but noted as the closing price of the shares on Monday was RM1.95, there might "be a direct implication on the determination of the settlement price of the call warrant".
To weed out manipulation, instead of fixing the final settlement price through the last five days' closing price, the average weighted price over five days should be used instead, some have argued rightfully so.
Such an arrangement will provide retail investors a level playing field, though its cold comfort now to the DRB-HICOM CE holders.
They will remember that sunny morning on July 19 2005, when a broker mistakenly sold 18.42 million IJM Bhd warrant rights at one sen a piece. The warrant eventually rose on the same day to 45 sen, causing the broker to incur an estimated RM10 million trading loss.
Subsequently, investors were assured that there will be mechanisms in place to ensure there won't be a repeat of such mistakes.
Cold comfort indeed
francis ferdandez
Alright, give me a break. I pinched those lines from a Bonnie Tyler song, and I don't need a hero, especially if it is a him.
The DRB-HICOM CE call warrant holders, however, probably need a hero badly, having been taken to the sewers due to one trading mistake.
On Monday, something dramatic happened to the DRB-HICOM mother share, when instructions to buy three million DRB-HICOM shares at RM1.95 a piece was wrongly keyed in as a sell order.
According to news reports, the error, which happened at about 4.50pm, saw three million shares transacted at RM1.95 until the closing bell.
By the way, at 4.48pm DRB-HICOM was trading at RM2.28 a share, making the lucky buyer's bid more than 30 bids lower than the actual value of the DRB-HICOM shares at that point of time.
This trading error cost the DRB-HICOM CE holders big time. The call warrants expire on August 1 with the settlement price based on the last five days' closing price.
As one commenter in a finance blog pointed out, since one of the five closing prices was pressed to RM1.95, even if the other 4 remaining closing prices are RM2.24, the settlement price will be only RM2.18, and the CE will be worth only 11.5 sen, as opposed to 14.5 sen if the five average closing price was RM2.24.
To make matters worse, the exercise price for the CE call warrants is RM1.95, and that set tongues wagging.
To set the record straight, OSK Investment Bank Bhd, the issuer of the now infamous call warrant, promptly issued a statement.
OSK said it was not involved in the substantial decline in DRB-HICOM, but noted as the closing price of the shares on Monday was RM1.95, there might "be a direct implication on the determination of the settlement price of the call warrant".
To weed out manipulation, instead of fixing the final settlement price through the last five days' closing price, the average weighted price over five days should be used instead, some have argued rightfully so.
Such an arrangement will provide retail investors a level playing field, though its cold comfort now to the DRB-HICOM CE holders.
They will remember that sunny morning on July 19 2005, when a broker mistakenly sold 18.42 million IJM Bhd warrant rights at one sen a piece. The warrant eventually rose on the same day to 45 sen, causing the broker to incur an estimated RM10 million trading loss.
Subsequently, investors were assured that there will be mechanisms in place to ensure there won't be a repeat of such mistakes.
Cold comfort indeed
francis ferdandez
hlk- Moderator
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