How P&G Plunge Derailed One Investor

NEW YORK (TheStreet) - Meet Mike McCarthy, the man who got flash crashed.

In a tragic twist of fate, McCarthy's broker happened to hit the button on a market order to sell his 738 shares of Procter & Gamble (PG) at roughly 2:46 p.m. on May 6. That order was filled at $39.37, not only the lowest price in roughly seven years, but also a dramatic difference from the $60-to-$63 P&G had traded at only moments before and after McCarthy's trade.

Mike McCarthy's stock sale receipt from Morgan Stanley-Smith Barney.

Procter & Gamble has characterized the sudden jolt in its stock price as an unwarranted "aberration." Spokeswoman Jennifer Chelune noted P&G's "solid" fundamentals and operational results, as well as its stock performance since the trading blip.

"There was a short period of time last Thursday afternoon when our stock appears to have been impacted by trading aberrations, but we ended both Thursday and Friday ahead of the broader market averages," says Chelune.

Indeed, P&G's sudden plunge and recovery was part of a broad market sell-off that at one point erased $1 trillion worth of market value on May 6. The rout began with worries about Europe's debt woes, and was then apparently fueled by heightened volatility, stock-related derivatives and fast-paced Wall Street technology that left individual retail traders in the dust.

Securities and Exchange Commission Chairwoman Mary Schapiro has called the wild swings "unacceptable" and pledged to investigate further. Stock exchanges canceled thousands of trades -- including some related to a stock that bounced from over $40 to a penny, and ended the day back above $40. But P&G -- a Fortune 500 company and Dow component whose market value and ownership eclipses many of the canceled names -- was left out of the mix.

For his part, McCarthy is left wondering how he got caught at the center of the chaos that unfolded on May 6.

The Trade

As the market began to toss and turn that day, McCarthy became antsy. He called his broker at Morgan Stanley's (MS) Smith Barney division, and asked her to sell some of his P&G shares.

McCarthy made that first call around 2 p.m. Eastern time, when the Dow Jones Industrial Average was down a few hundred points. But as stocks became even more volatile -- with the Dow tumbling nearly 1,000 points at one point, then recovering half that value within minutes -- McCarthy called his broker a few more times, in increasing stages of panic. Ultimately, he asked her to liquidate his entire stock portfolio.