Hyflux and the “Greater Fool” Trap: Lessons for Investors

Jan 12 / Cayden Chang

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The “Greater Fool” Trap: Lessons for Investors

When Hyflux collapsed, it was more than just another failed business. It was a cautionary tale of how poor financial decisions, investor complacency, and lack of due diligence can cost billions.


The Straits Times reported that Hyflux’s Tuaspring power project cost $890 million. Banks, wary of the risks, only lent $150 million, and even that required Hyflux to put up $252 million in equity. In other words, professional lenders saw the dangers clearly and limited their exposure.


But instead of stopping there, Hyflux turned to ordinary investors to fund the rest. In total, 34,000 retail investors poured in $900 million through preference shares and perpetual bonds. Sadly, most of them never realized they were stepping into a financial trap.

The “Greater Fool” Problem

This is a textbook case of looking for the greater fool:

  • Selling electricity, a commodity with razor-thin margins, was already a flawed business model.
  • Banks knew the risk was high, which is why they refused to fully finance the project
  • Hyflux then raised money from retail investors who did not fully understand what they were buying
The result? Thousands of Singaporeans lost their hard-earned savings while the banks that originally turned Hyflux away walked away relatively unscathed.

Why Did This Happen?

Several hard truths come out of this saga:

  • Lack of financial education. If more investors understood how to read financial statements, many would have seen the warning signs.

  • Failure to ask questions. Why didn’t investors stop to ask, “If the banks won’t lend, why should I?”

  • Greed. Preference shares and perpetual bonds were marketed with attractive yields. But higher returns almost always come with higher risk.

The painful reality is that many investors relied on trust and hope instead of doing their own due diligence.

The Lesson for Today’s Investors

Dangerous investments do not only come in the form of preference shares. They also show up in trendy vehicles like tokens, cryptos, and NFTs. The names change, but the trap is the same: selling to investors who don’t truly understand the risks.

No one is more interested in protecting your money than you are. That is why financial literacy and disciplined analysis are non-negotiable if you want to grow wealth safely.

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