Overconfidence and Arrogance Led to Facebook's IPO Fiasco: GreifeldVW Staff
In the ongoing fallout from Facebook’s IPO, NASDAQ OMX Group, Inc. (NASDAQ:NDAQ) CEO Robert Greifeld is now pointing fingers at arrogant and overconfident exchange staffers.
On Sunday while speaking at a conference at Stanford University’s Law School, Greifeld said the exchange had tested its trading systems with simulated increased trading volumes prior to Facebook’s IPO but it had not been ready for the high number of canceled orders prior to the stock’s debut, reported the Wall Street Journal.
From Nasdaq’s problems, Facebook Inc (NASDAQ:FB)’s start of trading had been delayed for 30 minutes on the now infamous May 18 IPO date. Once trading did begin, investors dealt with problems when attempting to execute and cancel trades. Combined, investors and financial firms are now claiming $500 million in losses from problems with the Facebook shares including ones they didn’t want, couldn’t sell, took back from disgruntled customers.
While Nasdaq’s order system has experience with IPOs–480 of them–Greifeld said it was unprepared for the large size of the Facebook IPO. He said via the Wall Street Journal, “Testing didn’t account for the increasing volume at which cancellations can come in.”
In addition, Greifeld said the exchange’s leaders had relied on its technology group but, “there was not enough of a check and balance. We did not have enough business judgment in the process.”
On the day of Facebook’s IPO, Greifeld flew across the country to Facebook Inc (NASDAQ:FB)’s corporate headquarters. He commended Nasdaq employees for doing a “great job” to get Facebook trading by 11:30 a.m. ET on May 18; Thirty minutes later, the exchange had seen 200 million shares trade.
But a question looming in everyone’s minds is whether he would have done things differently as Nasdaq was unable to confirm early trades by midafternoon, Greifeld said, “If we knew it would take to 1:50 [p.m.] to get the allocations out, we might have had a different” outcome.
Since the troubled IPO took place, investor confidence has waned in the stock market. Greifeld acknowledged this but believes it will have a short-term impact with the markets poised to grow at the economy’s rate.
Facebook Inc (NASDAQ:FB) is currently down 3.27 percent to $31.95.