Facebook IPO affected by Nasdaq technical issues

By Lee Kaelin on May 21, 2012, 10:50 AM

Nasdaq OMX Group Inc. faces scrutiny after shares of Facebook Inc. were plagued by delays and mishandled orders on its very first day of trading. Apparently computers used to drive the auctions were overwhelmed by order cancellations and updates in the opening moments of the hugely anticipated initial public offering.

After frantic efforts from company underwriters, namely Morgan Stanley who repeatedly purchased shares to keep the price up, the social networking giant closed its first day of trading at just 23 cent above its initial offering price of $38.00 per share. Part of that less than impressive performance was blamed squarely on the software used by Nasdaq for IPOs.

The software takes five miliseconds to launch an IPO, and according to Bloomberg, a massive influx of trade requests during those miliseconds threw the whole system into a loop. As a result of this, the IPO was delayed for around 30 minutes, but more crucially, many traders were left absolutely clueless as to whether their orders had been processed.

> On-going: Today's trading looks bleak for Facebook, having lost ~10% of its stock price. This is unrelated to NASDAQ's issues from last Friday.

"We’re not happy with our performance," Robert Greifeld, CEO of Nasdaq said during a conference call, adding that he felt "humbly embarrassed" by the events which unfolded in the "biggest IPO cross in the history of mankind." He added that staff at Nasdaq had to intervene at 11.30am after the IPO software failed to work, despite thousands of hours of testing for every conceivable scenario.

"It’s amazing that both Bats and Nasdaq unfortunately failed in an inglorious way," William Karsh, the former CEO at Direct Edge Holdings LLC, an exchange operator that competes with Nasdaq, said when speaking to Bloomberg. "It proves that technology isn’t infallible. There are so many moving parts that things can go wrong. That’s the lesson we learn."

The US Securities and Exchange Commission have said they will review the trading. Facebook did not respond to requests for further comment.




User Comments: 6

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Cycloid Torus Cycloid Torus said:

"IPO software failed to work, despite thousands of hours of testing for every conceivable scenario" - I do wonder if they tested with simultaneous 10x levels of all variables - or maybe that was inconceivable...

mosu said:

"Apparently computers used to drive the auctions were overwhelmed by order cancellations and updates in the opening moments of the hugely anticipated initial public offering." I believe order cancellations is the key word here and just proves that people realize what a big scam is Facebook.

MilwaukeeMike said:

I believe order cancellations is the key word here and just proves that people realize what a big scam is Facebook.</p>

That's what I heard.... investors know that all of FB's revenue is based on ads, and in order to sell ads FB needs to use the data that users put on their profiles. But FB users don't want their data shared with companies trying to sell them ads. It's a catch-22.

Nasdaqs issues didn't have anything to do with General Motors deciding to cancel their ad account with FB. They said it was because advertising on FB doesn't work.

Vrmithrax Vrmithrax, TechSpot Paladin, said:

A company whose product exists solely on computers is plagued by computer issues on launch of their IPO... Such irony!

As for the worth of Facebook, I have seen multiple reports on surveys that show over 60% of those polled feel that Facebook's value is massively over-inflated. Advertising and privacy concerns already pop up regularly with Facebook, now imagine how bad it will be with shareholder pressure to increasingly profitize the entire operation? I could easily see FB waning quickly as the revenue digging become more intrusive, and a new social network rising to fill the void.

MilwaukeeMike said:

<p>A company whose product exists solely on computers is plagued by computer issues on launch of their IPO... Such irony!</p>

<p> </p>

<p>As for the worth of Facebook, I have seen multiple reports on surveys that show over 60% of those polled feel that Facebook's value is massively over-inflated. Advertising and privacy concerns already pop up regularly with Facebook, now imagine how bad it will be with shareholder pressure to increasingly profitize the entire operation? I could easily see FB waning quickly as the revenue digging become more intrusive, and a new social network rising to fill the void.</p>

No, the irony is that they're sitting on the most valuable pile of user-specific info ever collected and they can't use it. Personalized advertising is the holy-grail of marketing. The scary part for FB is that their up and coming competition (Google+) happens to be an advertising genius. Google already has a store for music/movies/apps, and even their own mobile OS for phones and tablets. That's a comprehensive approach if ever there was one.

FB is a social networking company moving into advertising. Google is an advertising company moving into social networking. Google is in the position to be the one-stop-shop for email, search (our door to the internet), shopping, maps, youtube, calendar, and social networking. FB is facing big problems with privacy and image. Doesn't mean they're going to fail, but they might not grow.

Guest said:

Well it seems it only took them to sell shares for people to fainlly realise theat Facebook is all HOT AIR and life-wasting. Social indeed.

Go Suckerberg!

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