) initial public offering (IPO) debacle,
NASDAQ OMX Group Inc
) is facing the wrath of one of the IPO investors, who questioned
NASDAQ's failure to process orders to buy, sell or cancel requests
for Facebook shares on time, causing losses to investors.
The investor hopes to obtain a class action status for a case he
filed against the company regarding the same. The concerned
investor had tried to both order and then cancel requests for
Facebook shares but was unable to do so, owing to the technical
glitch in the trading platform.
NASDAQ was confronted with a surge of order cancellations and
updates on the very first day Facebook started trading, leading to
technical problems and a delay in trading for 30 minutes. However,
the solution deployed by the exchange to save the blushes was
inadequate and led to delays in order confirmations for another two
and a half hours.
Nevertheless, NASDAQ has already taken initiatives to rectify
the procedures for IPOs following the hiccups faced during the
Facebook IPO. For future IPOs, the exchange has decided to employ
the software used for regular opening and closing trading, rather
than persisting with the software that it used for the Facebook
However, the IPO remains a burning issue with both investors and
regulatory authorities. The Securities and Exchange Board and
Financial Industry Regulatory Authority have decided to review the
events surrounding the IPO, thereby increasing the pressure on both
the companies involved as well as the underwriter of the issue -
The review was prompted by certain media reports that disclosed
Morgan Stanley had reduced its revenue guidance prior to the IPO,
while Facebook advised many of its underwriters to do the same.
However, the information was provided only to select institutional
investors and not made public.
This selective disclosure breaches the fair disclosure
regulation, which requires public companies to make all material
information available to all investors at the same time.
The state of Massachusetts is also set to conduct an
investigation into the matter. The Secretary of Commonwealth of the
state issued a subpoena to Morgan Stanley regarding the issue.
However, Morgan Stanley maintains that it followed the same
procedure for the Facebook IPO as it does for other IPOs and that
these procedures are in compliance with relevant regulations.
NASDAQ currently carries a Zacks #4 Rank, which translates into
a short-term Sell rating, while Facebook carries a Zacks #3 Rank (a
FACEBOOK INC-A (FB): Free Stock Analysis Report
MORGAN STANLEY (MS): Free Stock Analysis Report
NASDAQ OMX GRP (NDAQ): Free Stock Analysis
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