This Monday (June 3), shortly after the U.S. stock market opened, shares of Berkshire Hathaway Inc.’s Class A stock, owned by the legendary investor Warren Buffett, plummeted from the previous trading day’s closing price of $620,000 per share to $185.1 per share, equivalent to just over 1,000 yuan in RMB. This triggered a wave of “speculative” enthusiasm among investors.
According to reports, 51 shares were traded at this price, with a total value exceeding $30 million.
However, by Monday afternoon’s close, the NYSE announced that all trades for Berkshire Hathaway Class A shares below $603,718.3 executed between 9:50 and 9:51 local time would be deemed invalid. Investors who bottom-fished and bought these 51 shares saw their paper wealth evaporate.
The situation was even worse for some smaller investors who tried to bottom-fish but ended up making high-priced transactions.
On June 6, an investor posted on social media that on the evening of June 3, he placed a market order on Huasheng Securities’ platform to finance the purchase of Berkshire Hathaway Class A shares. Given that his account only had a little over $1,000 in personal funds and the financing standard allowed for a maximum of twice leverage, he assumed that if the price went up to over $500, it wouldn’t execute. Unexpectedly, Huasheng Securities executed his order at over $710,000, resulting in leverage of over 2,000 times.
Subsequently, Berkshire Hathaway’s stock price fell to $610,000, leading to significant losses for the investor.
Huasheng Securities, co-invested by Sina and Weibo, is a licensed broker in Hong Kong holding licenses 1, 2, 4, 5, and 9 from the Hong Kong Securities and Futures Commission. Through its self-developed trading platform Huashengtong (launched in 2016), it offers investors fully online investment services in Hong Kong stocks, U.S. stocks, and A-shares.
An investigation by the “Daily Economic News” reporter revealed that Huasheng Securities opted for forced liquidation in response to this incident.
Moreover, despite the Securities and Futures Commission having clearly stated the need to rectify illegal cross-border business activities, and Huasheng Securities having delisted its app from domestic app stores in March this year, some investors had opened accounts after the app was delisted in China.
Owing Huasheng Securities Nearly $400,000 After Forced Liquidation
A “Daily Economic News” reporter contacted one of the affected investors through private messages, whose situation was similar to that of the person who posted online.
According to this investor, on the night of June 3, 2024, at 10:00 PM, his account had a total real-time amount of just over $1,300, yet he successfully bought 4 shares of Berkshire Hathaway-A through Huasheng Securities at an average price of $710,830.55 per share, totaling $2,846,225.04. Minutes later, his paper losses neared $340,000.
On June 5, 2023, around 7:00 PM, Huasheng Securities informed him of the decision to either make up the margin by 9:30 PM that day or face forced liquidation, including all stocks in his account.
Apart from the 4 shares of Berkshire Hathaway-A, the value of his remaining stocks was only about $150. From 10:00 PM on June 5, he received notifications of forced liquidation, and all his stocks were liquidated. After the forced liquidation, he still owed Huasheng Securities $389,300. Before liquidation, his daily interest was $451.83, and after liquidation, the remaining unpaid amount of $389,300 generated daily interest of about $61.87. Currently, his total cumulative paper loss stands at $390,600.
