Dentsu IPO: Stocks Rise, but Clerical Error Leaves Blushes at UBS

03 December 2001

Japanese agency giant Dentsu went ahead with its initial public offering on Friday, with shares rising Y50,000 to Y470,000 ($3,798) – the maximum daily gain allowed on the Tokyo Stock Exchange.

But thanks to a clerical error the flotation was anything but smooth, and early predictions that the stock would change hands at even higher prices – with bids of up to Y600,000 before the market opened – were not realised.

The error – which has left one of the three organisers of the IPO, investment bank UBS Warburg, red-faced – occurred at the start of trading at 9am. A UBS trader incorrectly entered an order to sell 16 Dentsu shares at Y610,000 apiece and upwards as 610,000 shares at no less than Y16.

Despite being cancelled at 9.02am, the mistaken order saw UBS’s computers register the sale of 64,915 shares, almost half the 135,0000 shares on offer in the IPO, with the torrent of orders at the wrong price driving down the share value to Y405,000.

UBS then spent the rest of the day trying to buy the shares it owes to people who purchased from them in the fateful two minutes. By the end of the day, it had amassed 18,339 at Y470,000. The error will, it is estimated, leave the bank with a bill of $50m–$100m.

Dentsu, which made around $84.8m from the 25,000 shares it issued itself, is reportedly fuming over the mix-up. Said one banker: “They waited 100 years to go public, and then this happens.”

News sources: AdAge Global; Wall Street Journal