Twinkletoe investors make 1,250% in hour after mistake in order
Direct Capital rights suddenly started to sell for 1 agora instead of NIS 2
Not bad for an hour's work: 1,250% profit is how much nimble investors taking advantage of a typo made on Sunday.
Yesterday trade began in shares and rights of the real estate company Direct Capital (security number 1110071). The company had issued rights based on a prospectus filed on January 15.
Trading in the rights took place for the one day, in parallel with the regular trade in the company's shares. Early in the day, something happened: the opening price of the rights to shares was set at 1 agora (NIS 0.01), probably because of a typing error at a trading room. Insofar as could be ascertained, the profits investors made from the mistake totaled tens of thousands of shekels.
According to the prospectus, the real price of the rights to shares is NIS 2. One certificate confers the right to buy a Direct Capital share for NIS 2. This price is weighted to the share price, which gets depreciated by any increase in the public float. Each time rights to shares are issued, the share price drops, because the company's equity is now divided into a larger number of shares.
When trading resumed, based on the exercise of rights, the company's share price fell from NIS 22 to NIS 13, but some investors were astonished to see rights to shares being offered for one agora. Investors quick on their feet leaped to buy the rights at the bargain price, and sold them an hour later at a profit of 1,200% to 1,300%.
Dealers confirmed that there were trades at the price of 1 agora.
The Direct Capital offering had not gone smoothly. Yesterday it was delayed several times, and ultimately trading in the rights was stopped for fear that not all the public had been exposed to information regarding the offering.
The Tel Aviv Stock Exchange commented that it does not know about any mistake, and that it had received no requests to cancel the transactions.