Mitsubishi Corp (OTCPK:MSBHF) has revealed a rogue oil trader cost the company $320 million USD, causing Mitsubishi stock to drop over 4%.
Declining Crude Oil Prices Exposed Bad Trades
The Japanese motor manufacturer reported the losses in a statement on Friday, in which the company said the employee had been working for a subsidiary called Petro-Diamond Singapore (PDS) to oversee oil trade with China. In this position, the employee made a series of unauthorized trades in January and manipulated risk management systems in order to make the trades look legitimate. However, crude oil prices began declining in July, which caused the losses to start mounting up. Mitsubishi shares are currently trading down at $49.50.
Mitsubishi said it discovered the losses in August when the employee was absent from work. The company also revealed that it dismissed the rogue trader on Wednesday and filed a complaint with the Singapore Police. Mitsubishi identified the employee as a male Chinese national but did not disclose his name; however, an individual close to the matter has identified Wang Xingchen, also known as Jack Wang, as the culprit.
No Risks At Present for Mitsubishi Stock
While $320 million represents less than one-tenth of the company’s projected profit for the year, investors in Mitsubishi stock are still rattled by the breach in the company’s risk management protocols. The company has moved to allay these fears by insisting no further such breaches should occur. “[Mitsubishi] recognizes the seriousness of this matter and shall be redoubling efforts throughout the entire MC Group to ensure that it does not happen again […] investigations confirmed that there are no such problems or risks at present.”
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Mitsubishi Stock and Surging Oil Prices
It is not the first incident of its kind to hit a Japanese trading house. In 2007, Misui & Co was forced to close its Singapore oil-trading unit after a trader lost $81 million USD. That trader and his supervisor were imprisoned as a result. Meanwhile, Mitsubishi stock may be further affected by surging oil prices following a major attack on a Saudi Arabian oil refinery.
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