Business World

Friday 24 November 2017

Nasdaq faces €80m claim over Facebook IPO fiasco

Market-makers looking to recoup losses after customer order glitch

CLAIMS by four of Wall Street's main market-makers against Nasdaq over Facebook's botched IPO are likely to exceed $100m (€80m), as they and other traders continue to deal with thousands of problems with customer orders.

A technical glitch delayed the social networking company's market debut by 30 minutes last week and many client orders were delayed, giving some investors and traders significant losses as the stock price dropped.

The exchange operator is facing lawsuits from investors and threats of legal action from brokers.

Four of the top market makers in the Facebook IPO -- Knight Capital, Citadel Securities, UBS AG and Citi's Automated Trading Desk -- collectively have probably lost more than $100m from problems arising from the deal, said a senior executive at one of the firms.

Knight and Citadel are each claiming losses of $30m to $35m, potentially overwhelming a $13m fund the exchange set up to deal with potential claims.

Nasdaq also has to contend with the outside prospect that it could lose the Facebook listing entirely after having just obtained it.

Morgan Stanley was preparing to adjust thousands of trades yesterday to ensure outstanding limit orders to sell will be filled at no more than $42.99 a share for Facebook stock from last week's botched initial public offering, it was reported.

Morgan Stanley said that limit orders to sell shares at $43 or higher that have not yet been processed because of glitches at Nasdaq will be settled over the next few days at less than $43.

Fewer than one million shares traded in a two-minute period on the opening day above $43. Shares reached a high of $45.

Orders

Limit orders allow investors to buy or sell shares at a pre-set price. In the case of the newly issued Facebook shares traded last Friday, Morgan Stanley's adjustment applies only to sell orders.

Meanwhile, Silicon Valley isn't quite ready to dump Morgan Stanley over the IPO fiasco.

The reasons run from the unusual size of the Facebook deal -- a $16bn offering -- to blaming the Nasdaq, to the strong relationships Morgan Stanley's lead tech banker Michael Grimes and his team have crafted over the years with deep-pocketed venture capitalist firms and executives in the San Francisco Bay area.

Irish Independent

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