Performance Nightmare: Nasdaq & the Facebook IPO

Nasdaq OMX Group Inc.

Facebook investors didn’t “like” it when glitches hindered trading on opening day

Setting the scene: On February 1st 2012, on its eighth birthday, Facebook filed for an initial public offering (IPO), and was soon predicted to be valued at $100 billion (that’s four times the value of Google when it went public in 2004). Trading opened on Friday 18th May 2012, with shares opening for $38 (£24) but selling for $42.

Performance Nightmare: Due to a technical glitch on Nasdaq.com, the Facebook IPO launch was delayed by half an hour. Then, traders suffered a lack of visibility on order changes, and problems cancelling orders or even accessing the site, allegedly due to a “high-volume rush”. This hiccup affected 30 million shares and may have cost investors $100 million, as in some cases the price of shares had already dropped by the time orders had eventually been processed – hours after being placed, and in some cases “cancelled”. The level of demand for Facebook shares also affected financial site etrade.com:

Indeed, it seemed like neither Nasdaq or etrade were adequately prepared for the biggest, most public IPO opening in history; Nasdaq acknowledged “design problems” with its technology and vowed to improve it for future IPO openings. The fallout is looking to be costly; Nasdaq has already agreed to reimburse investors as much as $13 million for the blunders, and a multi-million dollar lawsuit has been filed against them by representatives of investors; Facebook itself along with Mark Zuckerberg are also being sued for Facebook shares allegedly being overvalued initially. The glitches were also blamed for share prices dropping below the expected level after several days of trading.

Picture: Sean MacEntee


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