Banking & Finance

NASDAQ Tries To Make Good On Facebook IPO SNAFU, Too Little Too Late (NDAQ, FB, NYX, IBM)

The NASDAQ OMX Group (NASDAQ: NDAQ) is going to try to make good on its botched IPO of Facebook, Inc. (NASDAQ: FB).  This is not really good to the public, at least not directly, but it is an olive branch to the trading firms that had bad trading outcomes around this controversial IPO.  It and The NASDAQ Stock Market are “seeking review by the Securities and Exchange Commission of a one-time voluntary accommodations program for qualifying members who were disadvantaged by technical problems that arose during the Facebook IPO cross on May 18.”

NASDAQ is claiming that the technical problems experienced around the Facebook IPO have been remedied.  The question is whether or not you believe them.  NYSE Euronext, Inc. (NYSE: NYX) has reportedly been considering how it could offer an exchange listing to Facebook, and frankly it came out looking like a prince here.  With having specialists, or designated market makers, in control of the price it could have done a much better job both pricing the stock and stabilizing the support.  That is at least the theory.  Still, if you were a specialist you might have gone broke running this IPO.

Here is what the NASDAQ is offering.  Under NASDAQ Rule 4626 it established a $3 million ceiling for accommodation funds. NASDAQ also said that it estimated the exchange’s Facebook-related revenues over the next five years at about $7 million, while the NASDAQ’s error account on May 18 was $10.7 million.  The NASDAQ Board approved a voluntary accommodations fund of approximately $40 million, and approximately $13.7 million would be paid in cash to member firms.  Full details and suppositions are here.

NASDAQ OMX also announced that it selected International Business Machines Corporation (NYSE: IBM) to “conduct a thorough review of the current state of processes for designing, developing, testing, deploying and operating market systems.”  That may be something close to free money for IBM it looks like.

NASDAQ shares are up 1.5% at $22.20, but NYSE Euronext shares are up 2.3% at $24.60.  Maybe the NYSE should ask rival NASDAQ if they would like a specialist to run their share price trading each day. What the market is telling you is that today’s olive branch is not really enough to get people back under the good graces.

Keep in mind that this effort today does not really compensate investors for their losses.  Billions of dollars in market value have been eroded here in Facebook shares.  Then there is the secondary and tertiary damage done to social networking peers and to the broader market.

Frankly, our take is that Facebook may have been one of the strongest arguments that supports even more investors turning away from stocks forever.  NASDAQ’s effort here will not change that.  This feels like it is too little of an effort and like it is too late for investors to care.


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