Facebook IPO: The Biggest Loser Appears to be UBS

Facebook IPO: The Biggest Loser Appears to be UBS

The losses due to Facebook Inc (NASDAQ:FB) IPO technical glitch were initially estimated to be about $100 million. However, a couple of weeks ago that figure was doubled to about $200 million by some stockbrokers and analysts.

The thirty minute technical failure, which resulted in system delays, not only have hurt impatient  individual investors, but also corporate brokers and banks.

Switzerland’s UBS AG (USA) (NYSE:UBS) is now reported to be the biggest loser. While the bank has not disclosed the total loss realized, The Wall Street Journal and CNBC have estimated the loss to be around $350 million.

If these reports stand are true, then UBS will be the largest loser in the IPO to date. The Switzerland based bank has vowed to use all means to recoup its losses, but insisted that it is yet to file a lawsuit over the matter, a company spokesperson said.

NASDAQ OMX Group, Inc. (NASDAQ:NDAQ) has since vowed to compensate the losers by committing $40 million, something that is tiny compared to the actual losses. For instance, the estimated amount, excluding UBS’s loss is approximately $200 million; this would mean that the current compensation figure can only cover up to 20%.

Add UBS AG (USA) (NYSE:UBS) into the equation and the compensation amount is nothing but peanuts, as this will likely cover less than 9% of the total loss. At this point, we are not sure how many more banks will come claiming compensation. UBS may have just cleared the cobwebs of many, which have been indecisive over the matter.

The problem is based on Nasdaq’s 2006 pre-IPO auction process, which allows traders to place orders before the stock begins trading at the exchange. The New York Stock Exchange NYSE Euronext (NYSE:NYX) has expressed its concern over the debacle citing fears that it might give NASDAQ an unfair edge in market share.

This is because customers who lost during the IPO are likely to divert their orders to NASDAQ with an aim of getting compensation; this massive shift is likely to generate enormous financial benefits to the exchange, considering that it is only giving out less than 9% of total losses experienced.


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