Facebook Inc. (FB:US)’s botched initial public offering was the fault of the Nasdaq Stock Market and the exchange owner will learn from its mistakes, the chief executive officer of Knight Capital Group Inc. (KCG:US) said.
Lawyers for Knight, whose equity wholesaling unit executes orders from retail investors sent by discount brokers, remain in contact with Nasdaq OMX Group Inc. (NDAQ:US), Thomas Joyce, the CEO of the Jersey City, New Jersey-based firm, said today in a Bloomberg Television interview. Knight lost $35.4 million in trading related to the May 18 debut, described by Nasdaq CEO Robert Greifeld as the “biggest IPO cross in the history of mankind.”
“Their technology failed and then there were a series of decisions made after the technology failed that were unfortunate,” Joyce said today. “Bob and that organization will learn from what happened that day and I have no doubt will improve upon it.”
A technical glitch with Facebook’s auction to set its first price delayed the open while Nasdaq’s efforts to fix the problem prevented trade reports from being disseminated for more than two hours, spurring confusion among brokers and investors. Joyce and competitors to the New York-based exchange, such as NYSE Euronext (NYX:US), have blamed Nasdaq and called its mishandling of the IPO a setback for the securities industry.
Nasdaq is seeking Securities and Exchange Commission approval of a plan to set aside $40 million for brokers whose orders were mishandled.
Facebook shares have plunged 24 percent since the offering, compared with the Standard & Poor’s 500 Index’s 6.3 percent gain. Greifeld told reporters in May that the IPO price of $42 was “proper with respect to volume and price.”
Knight reported second-quarter earnings (KCG:US) yesterday that fell 79 percent, including the loss on the Facebook IPO. Without the loss and excluding a pretax investment gain, profit would have risen 5.3 percent, data compiled by Bloomberg show.
“We have been in reasonably consistent dialogue with Nasdaq,” Joyce said yesterday during the earnings call. “We’re going to be all eyes and ears waiting to watch and read and hear about what they suggest in their filing.”
To contact the reporters on this story: Whitney Kisling in New York at firstname.lastname@example.org; Erik Schatzker in New York at eschatzker@bloomberg.
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