The primary cause of the Brisconnections tragedy is that the market operator and/or regulator lured unsuspecting buyers into a trap. The trap was sprung when the very first units were traded at the market operator imposed floor price of 0.1 cent.
With two unpaid $1 contributions, the units could have been worth as little as negative $1.999.
In a falling market, a unit holder could not sell at fair value – they were locked-in until after the first call was paid, when the units might again trade at fair value.
The market effectively failed upon execution of the first 0.1 cent trade. With no capacity for informed trading for 6 months or so from that point, little wonder the odd naïve retail investor fell into the pit.
If the units had traded in negative territory, even the most intrepid retail investor would’ve baulked. The belated effort of the market regulator to preclude uninformed trading in contributing shares by retail investors only deflects attention from the underlying cause.
If the units had been allowed to trade at fair value in an unfettered market, the people holding them now would be quite happy to make the two additional $1 contributions when called.
So, the artificial floor price was whose rule and who thought it was a good rule?
BCS Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
