Nasdaq admits technical glitches pre-Facebook IPO

Steven Loeb · May 21, 2012 · Short URL:

Investors will be paid back $13 million, despite estimates of up to $100 million in loses

Facebook’s first day of trading did not go as well as the company hoped, but it seems that there might be more to the story than anyone originally thought.

While Facebook’s stock did manage to rise over 12% to spike at $42.05 during its first day of trading, it eventually came down again, ending at $38.23, a mere 0.6% rise over its initial price.

So what happened? Was the stock really as overvalued as some said?

Well, perhaps it was. There were, however, other things that may be responsible for the lackluster start that were completely out of Facebook’s control.

Nasdaq failure

On Sunday, Nasdaq chief exec Robert Greifeld admitted to glitches in early Facebook trading.

When a large number of order cancellations overwhelmed the system, it caused a 30-minute delay in delivering the opening price. The vast number of cancellations also caused Nasdaq to have to delay delivering order messages to investors for hours. Some did not know whether or not their orders went through for six hours.

While Greifeld says that this had no impact on the stock, he also admitted that up to 30 million orders of Facebook stock could have been affected and defended how Nasdaq handled the problems.

"Our outreach to investors and customers was at an all-time high level," Mr. Greifeld is quoted as telling reporters Sunday.

"What you're hearing is some basic frustration with the message."

Investors were understandably furious with what happened, demanding up to $100 million for loses that occurred because of the technical problems. On top of that, the SEC announced plans to look into what happened.

Now Nasdaq is trying on make things right, spending $13 million to make up for the glitches, the Wall Street Journal reported on Monday.

Of that money, $10 million will come directly from money made by Nasdaq from buying and selling the Facebook shares. This money will be added to the $3 million they are allowed to pay out to customers who lose money due to failures by Nasdaq.

Facebook’s stock dipped even further on Monday, going below the IPO price to finish at 34.03, down 11% for the day, perhaps signaling that it was not entirely Nasdaq’s fault that the stock under performed. The stock itself may have a rocky future ahead of it if this trend continues.

Still, Friday should have been a boon for the market. Instead it turned into a debacle, and now all Nasdaq can hope is that $13 million is enough to make up for it.

Facebook could not be reached for comment

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