On Monday, investors saw a rare opportunity when Berkshire Hathaway’s Class A shares appeared to be trading at a massive discount of over 99%. According to FactSet data, many traders attempted to capitalize on this apparent glitch. However, the likelihood that these trades will be honored is slim.
The NYSE Glitch and Its Consequences
The New York Stock Exchange (NYSE) experienced a significant glitch that led to a trading halt for Berkshire Hathaway’s Class A shares and 39 other stocks, including Bank of Montreal (CA) and Barrick Gold (CA). The affected stocks showed steep declines, with Berkshire’s shares seemingly plummeting from $627,400 to $185.10. Trading was halted at 9:50 a.m. Eastern time and resumed shortly before noon.
The glitch resulted from a technical issue involving industry-wide price bands published by the Consolidated Trade Association’s Securities Information Processor. This issue triggered “limit-up/limit-down” trading halts shortly after Wall Street opened.
Likelihood of Trade Reversal
Despite the flurry of activity from traders trying to buy shares at the drastically reduced price, it is highly probable that these trades will be reversed. According to Joe Saluzzi, co-founder of Themis Trading, and Jonathan Corpina, senior managing partner at Meridian Equity Partners, the trades that were executed at these erroneous prices are almost certain to be canceled under the NYSE’s policy on “clearly erroneous transactions.”
“These are definitely going to be busted,” Saluzzi said. “They are so far away from the mark.” Corpina echoed this sentiment, stating that the trades executed at the erroneous prices triggered the trading halt and are expected to be reversed.
Historical Precedents
This incident is reminiscent of a similar trading glitch that occurred in January 2023, when issues with the NYSE’s opening auction led to trades in more than 250 securities being filled at incorrect prices. At that time, the exchange announced that those trades would not be honored.
Impact on Berkshire Hathaway
Hypothetically, if the trades were to stand, Berkshire Hathaway’s market capitalization would have been slashed nearly in half, from $897.1 billion to $536.3 billion. However, given the NYSE’s procedures and the precedent set in 2023, such a dramatic impact on Berkshire’s market cap is unlikely to materialize.
Trading in Berkshire’s Class B shares (BRK.B) was unaffected by the glitch, providing some stability amid the confusion.
Market Reaction and Resumption
Trading in all affected stocks resumed shortly before noon after the NYSE addressed the technical issue. The NYSE spokesperson confirmed that the glitch was tied to the Consolidated Trade Association’s price bands, which are intended to prevent extreme volatility but, in this case, caused significant disruptions.
Conclusion
While the opportunity to buy Berkshire Hathaway shares at a seemingly rock-bottom price was tempting for many investors, the NYSE’s policies and past actions suggest that any trades made during the glitch will likely be reversed. This incident serves as a reminder of the importance of technical stability in the markets and the mechanisms in place to correct such anomalies.
General Disclaimer: This article is for informational purposes only and reflects the current understanding and opinions regarding the events described. The information provided is accurate to the best of our knowledge at the time of publication. Always verify details and consult with professionals before making any decisions based on this content.
