Nasdaq admits it bungled Facebook?s IPO
?Poor design? in Nasdaq OMX Group Inc.?s software driving auctions for initial public offerings delayed Facebook Inc.?s first day of trading, the exchange operator?s chief executive officer said.
Computer systems designed to establish an opening price were overwhelmed by order cancellations and updates as the ?biggest IPO cross in the history of mankind? was occurring, Nasdaq CEO Robert Greifeld said yesterday in a conference call with reporters. Nasdaq?s systems fell into a ?loop? that prevented the second-largest U.S. stock venue operator from opening the shares on schedule following the US$16 billion deal, he said.
The day was another setback for American equity exchanges trying to bounce back from a botched IPO in March by Bats Global Markets Inc., another bourse owner. Nasdaq?s issues contributed to disappointment among investors as Facebook?s stock closed up 0.6% after rising 18% earlier.
?This was not our finest hour,? Greifeld said a day after Nasdaq?s board convened to discuss the offering. Asked if his job is secure, he said: ?I certainly hope so.?
After 421 million Facebook shares were priced by underwriters on May 17, problems with the opening surfaced the next morning when the first transaction took a half hour longer than Nasdaq planned. About 30 minutes later, Nasdaq reported an issue confirming trades from the opening auction with the brokerages that placed them. Nasdaq later established an appeals process for investors whose instructions weren?t carried out.
The U.S. Securities and Exchange Commission said it will review the trading. Jonathan Thaw, a spokesman for Menlo Park, California-based Facebook, declined to comment.
Treading Water
Facebook advanced 23 cents to US$38.23 after surging as high as US$45. It fell as low as the IPO price of US$38, which valued the company at US$104.2 billion. More than 43 million shares were executed at that level, the second-most changing hands at any price except for US$42, the opening auction price. Data compiled by Bloomberg show a total of 583 million Facebook shares traded.
Underwriters purchased shares to keep them from falling below US$38, people with knowledge of the matter said. The bankers supported the stock amid Nasdaq?s difficulties delivering trade execution messages, said one of the people, who asked not to be identified because the transactions are private.
Facebook was originally scheduled to open at 11 a.m. At about 11:07 a.m., a Nasdaq official told market participants on a conference call that the exchange was delaying the opening. Aside from assurances that an update was coming, the phone line went silent until just before the first trade at about 11:30, according to two people who were on the call and asked not to be identified because the discussions were private.
Appeals Planned
Buy and sell requests that should have been filled in the opening auction, based on the exchange?s rules, weren?t, while cancellations for other trade requests were ignored, they said. Their employers plan to appeal some of the results they received for orders sent to Nasdaq.
Nasdaq began experiencing problems with its bid and offer quotes after the opening auction trade. By 11:31 a.m., the exchange?s highest bid, or price at which market participants were willing to purchase shares, was US$42.99, and its lowest offer to sell was US$42.50, according to data compiled by Bloomberg. The quotes produced a socalled crossed market, where sellers appear to be asking less than buyers are willing to pay.
Other markets continued trading, usually with a difference of a few cents between their best bid and lowest offer. Nasdaq?s quotes were marked as manual and not electronically accessible, which allowed brokers and other exchanges to ignore the venue?s prices. Its offer price later dropped to US$38.01 and remained at that level, almost US$4 below the highest bid, until 1:49 p.m., according to data compiled by Bloomberg.
?Don?t Like?
?Clearly investors would hit the ?don?t like? button,? Matt McCormick, who helps oversee US$6.2 billion at Bahl & Gaynor Inc. in Cincinnati, said in a telephone interview.
The IPO price valued the company at 107 times trailing 12-month earnings, more than all Standard & Poor?s 500 Index stocks except Amazon.com Inc. and Equity Residential. The valuation also made Facebook, co-founded in 2004 by a then-teenage Mark Zuckerberg, the largest company to go public in the U.S.
? Bloomberg
Computer systems designed to establish an opening price were overwhelmed by order cancellations and updates as the ?biggest IPO cross in the history of mankind? was occurring, Nasdaq CEO Robert Greifeld said yesterday in a conference call with reporters. Nasdaq?s systems fell into a ?loop? that prevented the second-largest U.S. stock venue operator from opening the shares on schedule following the US$16 billion deal, he said.
The day was another setback for American equity exchanges trying to bounce back from a botched IPO in March by Bats Global Markets Inc., another bourse owner. Nasdaq?s issues contributed to disappointment among investors as Facebook?s stock closed up 0.6% after rising 18% earlier.
?This was not our finest hour,? Greifeld said a day after Nasdaq?s board convened to discuss the offering. Asked if his job is secure, he said: ?I certainly hope so.?
After 421 million Facebook shares were priced by underwriters on May 17, problems with the opening surfaced the next morning when the first transaction took a half hour longer than Nasdaq planned. About 30 minutes later, Nasdaq reported an issue confirming trades from the opening auction with the brokerages that placed them. Nasdaq later established an appeals process for investors whose instructions weren?t carried out.
The U.S. Securities and Exchange Commission said it will review the trading. Jonathan Thaw, a spokesman for Menlo Park, California-based Facebook, declined to comment.
Treading Water
Facebook advanced 23 cents to US$38.23 after surging as high as US$45. It fell as low as the IPO price of US$38, which valued the company at US$104.2 billion. More than 43 million shares were executed at that level, the second-most changing hands at any price except for US$42, the opening auction price. Data compiled by Bloomberg show a total of 583 million Facebook shares traded.
Underwriters purchased shares to keep them from falling below US$38, people with knowledge of the matter said. The bankers supported the stock amid Nasdaq?s difficulties delivering trade execution messages, said one of the people, who asked not to be identified because the transactions are private.
Facebook was originally scheduled to open at 11 a.m. At about 11:07 a.m., a Nasdaq official told market participants on a conference call that the exchange was delaying the opening. Aside from assurances that an update was coming, the phone line went silent until just before the first trade at about 11:30, according to two people who were on the call and asked not to be identified because the discussions were private.
Appeals Planned
Buy and sell requests that should have been filled in the opening auction, based on the exchange?s rules, weren?t, while cancellations for other trade requests were ignored, they said. Their employers plan to appeal some of the results they received for orders sent to Nasdaq.
Nasdaq began experiencing problems with its bid and offer quotes after the opening auction trade. By 11:31 a.m., the exchange?s highest bid, or price at which market participants were willing to purchase shares, was US$42.99, and its lowest offer to sell was US$42.50, according to data compiled by Bloomberg. The quotes produced a socalled crossed market, where sellers appear to be asking less than buyers are willing to pay.
Other markets continued trading, usually with a difference of a few cents between their best bid and lowest offer. Nasdaq?s quotes were marked as manual and not electronically accessible, which allowed brokers and other exchanges to ignore the venue?s prices. Its offer price later dropped to US$38.01 and remained at that level, almost US$4 below the highest bid, until 1:49 p.m., according to data compiled by Bloomberg.
?Don?t Like?
?Clearly investors would hit the ?don?t like? button,? Matt McCormick, who helps oversee US$6.2 billion at Bahl & Gaynor Inc. in Cincinnati, said in a telephone interview.
The IPO price valued the company at 107 times trailing 12-month earnings, more than all Standard & Poor?s 500 Index stocks except Amazon.com Inc. and Equity Residential. The valuation also made Facebook, co-founded in 2004 by a then-teenage Mark Zuckerberg, the largest company to go public in the U.S.
? Bloomberg
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