If earlier this week Mark Zuckerberg was being sued by investors that lost money at the Facebook IPO, now Nasdaq is compensating for the glitches. Brokerages were offered $40 million as compensation for the Facebook IPO glitches made a few weeks ago.
A lot of people got burned with the highly acclaimed Facebook IPO. Obviously soon after seeing that what they were promised wasn’t what they got, investors reacted. Morgan Stanley and Mark Zuckerberg were accused of insider trading, while Nasdaq was slammed with a lawsuit for not handling the IPO correctly.
The chief executive of Nasdaq OMZ Group, Robert Greifeld, confessed that the company did made some “mistakes in the Facebook listing”. The confirmation was made during an annual investors’ meeting. Now, several weeks since Facebook’s almost disastrous IPO, Nasdaq has estimated the damage caused to over $40 million.
To set things straight, Nasdaq has offered to give brokerages $40 million in compensation for the money lost during the Facebook IPO. Moreover, the company said it hired IBM to review its “processes for designing, developing, testing, deploying and operating market systems”.
Despite Nasdaq’s decision to compensate for the damage, many say $40 million is not enough. Harvey Pitt, former chief of Securities and Exchange Commission (SEC), said the compensation brokerages would get is “too limited”. Pitt said that Nasdaq deserves appreciation for coming forward without having the SEC forcing a decision on it.
However, Pitt believes that “the steps it has taken – while positive – are too limited. The dollar estimates for harm caused by Nasdaq’s failures easily exceed – several times over – the $40 million it has set aside”.
He added Nasdaq made “a blunder of major proportions” and “the exchange’s performance will likely the subject of sharp criticism from the SEC”. In the end Pitt estimates that SEC’s review “will hurt Nasdaq in its effort to corral additional listings and garner more U.S. IPOs”.
NYSE Euronext had a similar take regarding Nasdaq’s mistakes during the Facebook IPO. They believe the compensation “would establish a harmful precedent” and they want to make sure that “Nasdaq’s proposal cannot be allowed to permit an unjust and anti-competitive situation”.