UBS Considers Legal Action Over Facebook Losses
By SwissInfo
Swiss bank UBS is considering legal action against the Nasdaq stock exchange amid reports the beleaguered bank lost as much as $350 million (SFr336 million) on the botched Facebook share float last month.
In a statement, UBS confirmed that the bank made a loss due to Nasdaq’s technical issues when the social networking company’s stock began trading on May 18.
The bank declined to disclose the amount of its losses but said it was “not material”. It said UBS was considering its options for recovering its losses but had “not yet taken legal action”.
“Given the size of our United States equities business and our role as a major market maker, UBS was affected by these issues, as we believe other market participants may have been,” the bank said.
“The incident was an extraordinary market-wide event caused by problems for which Nasdaq has publicly accepted responsibility.”
US news organisations CNBC and The Wall Street Journal, citing people familiar with the matter, reported that the bank was preparing legal action to recover its losses which could be as much as $350 million.
The $350 million figure dwarfs previous estimates for the combined losses resulting from technical glitches at Nasdaq during Facebook’s first day of trading. This week, the exchange said it would hand out $40 million in cash and credit to reimburse investment firms.
Facebook’s initial public stock offering was one of the most widely anticipated market debuts in years. But it quickly turned chaotic.
The opening was delayed by half an hour. Then, technical problems kept many investors from buying shares in the morning, or selling them later in the day, or even knowing whether their orders went through. Some investors complained they were left holding shares they didn’t want.
According to CNBC and the Journal, UBS placed an order for one million shares but did not receive confirmations and repeated the order several times. So it ended up with much more stock than it intended.
Facebook’s stock originally priced at $38 and closed that first day at $38.23, disappointing those hoping for a first-day surge. Nasdaq has said it was embarrassed by the glitches but that they didn’t contribute to the underwhelming returns.
On Friday, at market close, Facebook shares were trading at $27.10.
Poor UBS! Lost money on a speculative (rip-off) trade! Boys that’s the nature of the (dirty) game of speculation, particularly in smoke and mirrors games like Facebook.
Of course we could ask, ‘what is a bank doing in the speculation business?’, but in this day of financial fiddles/swindles with money-capital that is mostly fictitious that would be out of fashion.