June 2, 2012
Nasdaq Receiving Criticism For Handing Of Facebook IPO Glitch
Technological glitches that helped taint Facebook's $16 billion initial public offering last month have some investors miffed at Nasdaq, and some are arguing that the U.S.-based stock exchange isn't going enough to soothe the hard feelings or ease the concerns of jilted investors.
In a June 1 article, Reuters reporter John McCrank wrote "the exchange has done little to conciliate market making clients - a number of which lost tens of millions of dollars each due to the trading problems" that occurred during the social network's IPO on May 18. "There has been no outright apology. And as angry as some customers may be, experts say they have little alternative but to keep trading on the exchange."
According to McCrank, the stock market announced that they would be establishing a pool of nearly $14 million in order to help offset losses, and conducted a "member's-only" conference call with one of their executive vice presidents. One investor, Mark Turner, the head of trading at New York-based Instinet, said that communication with Nasdaq officials both now and on the day of the IPO has been "minimal," and four of the market's top investors, including UBS, Citigroup, Knight Capital, and Citadel Securities, lost upwards of $115 million combined, Reuters said.
Nasdaq OMX President Robert Greifeld, who reportedly hosted an event at a California technology conference earlier this week, told reporters a few days after the IPO that the stock exchange has "humbly embarrassed" over the trading glitch. However, McCrank said, "he stopped short of a public apology."
Facebook, which opened their first day of trading valued at $38 dollars, though as RedOrbit's own Michael Harper reported on May 18, trading opened late following a 30 minute delay blamed on a rush of initial investors and the volume of IPO shares. By the end of the day, shares had fallen to $38.23, and as of 1:54pm EDT on Friday, June 1, that price had plummeted to just $27.66 per share.
For all the backlash over Facebook's IPO, though, investors had plenty of criticism for Nasdaq and others as well.
"They have failed in executing a comprehensive or cohesive communications strategy," Michael Robinson, a former U.S. Securities and Exchange Commission (SEC) public affairs and policy chief, a former media relations employee with Nasdaq, and an executive vice president at Levick Strategic Communications, told Reuters. "Here we are a couple of weeks later and I'm still not entirely sure what it is they said went wrong."
"By now, it's well-known that the Facebook IPO was a mortifying botch job, with the stock price set too high, too many shares offered, and a bunch of bungled trades right out of the gate," U.S. News Chief Business Correspondent Rick Newman said. "The trading glitches that marred the opening day of trading on the NASDAQ weren't Facebook's fault, they were NASDAQ's. The decision to sell too many shares, at a price higher than the market could bear, falls at the feet of Morgan Stanley, the lead underwriter."
"There was apparently pressure from many of Facebook's biggest early investors -- otherwise known as owners -- to increase the size of the float, so more of them could cash out and redeem their investments," he added. "Now that the air has come out of the bubble, Facebook shareholders are suddenly worried that the social-media upstart might not be quite as invincible as they initially hoped."