88E today's Australian Financial -ReviewReddit-fuelled ‘stonks’...

88E today's Australian Financial -Review

Reddit-fuelled ‘stonks’ stoke ASX controversy

There’s evidence the Reddit-fuelled retail trading frenzy time-stamped by GameStop on Wall Street is accelerating in Australia as wild price moves in penny stocks and small caps spike in regularity.

Data out of Australia’s leading retail broker Commsec last week showed a virtually unknown Alaskan oil explorer named 88 Energy was the most traded stock on the entire ASX by contract note volume over the week ending March 29.

An emoji-powered social trading frenzy helped 88 Energy soar 667 per cent. The Australian Financial Review

In fact an emoji-powered social trading frenzy helped 88 Energy soar 667 per cent over the month of March, which included five operating updates, an ASX speeding ticket, and share placement to sophisticated investors.

In February its chief executive David Wall lit the rally’s fuse by boasting that 88 Energy was targeting more than 1 billion barrels of recoverable oil across its Alaskan tenements, with the Merlin-1 well results “potentially transformational for our shareholders.”

But on April 6 the explorer shocked shareholders by revealing drilling at its Merlin-1 well had suffered from power outages, equipment failure, and a drill stuck underground to preclude the discovery of oil.

In response shares gave back most of their gains to plunge 67 per cent from 7.3¢ to 2.4¢ and leave an army of bagholders down as much as 75 per cent from the 9.7¢ April 1 share price peak.

On April 6 undisclosed inside investors exercised 500,000 share options at 0.05¢, which is only around one 50th of today’s 2.6¢ share price. In February it raised $12 million by issuing 1.5 billion new shares at 0.008¢ at the same time as revealing its CEO would leave in May.

In total the cash-burning, zero-revenue explorer has a ridiculous 12.52 billion shares on issue, all of which means there were plenty of red flags for more-experienced retail investors.