Fallout: Major Bank to Sue Nasdaq Over Botched Facebook IPO

When Facebook made its initial public offering (IPO) back in May, it didn’t exactly go as planned. In fact, it was a disaster.

Now it looks like things are about to get even more complicated for a few of the firms involved in the social network site's "coming-out" party.

“UBS … said it took a loss of more than $350 million on the ill-fated Facebook Inc initial public offering, wiping out nearly half of its second-quarter profit, and it accused Nasdaq OMX Group Inc. of a ‘gross mishandling’ of the stock-market listing,” the Wall Street Journal’s Maarten Van Tartwijk reports.

“Switzerland's largest bank by assets said it will begin legal proceedings to recoup all of its losses -- another blow to its struggling investment bank and raised further questions about the unit's future,” the report adds.

UBS 2Q profits are down 58 percent from 1.02 billion francs in 2011 to 425 million Swiss francs post-Facebook IPO. This means that when compared with the first quarter, earnings are down a full 49 percent. And as if that wasn’t bad enough, the bank also reports a 130-million-franc pretax loss for 2Q after a 383-million-franc profit earlier last year.

“Facebook's IPO, one of the biggest in U.S. history, turned sour after trading glitches led exchange operator Nasdaq to delay Facebook's opening, leaving millions of shares' worth of trading unconfirmed for hours,” the WSJ explains.

“UBS, which was one of the IPO's bigger market makers, said it had an automatic trading system in place that kept entering and re-entering orders despite the absence of confirmations that the exchange had carried them out,” the report adds.

UBS argues that because Nasdaq processed the orders, they are responsible for the bank winding up with more shares than it had actually ordered. The bank blames Nasdaq for making "multiple operational failures," adding that it plans to “recoup all of the losses.”

“The Facebook matter was another harsh blow to UBS' struggling investment bank. The loss linked to the Facebook IPO aggravated an already weak performance at the business and helped to pull overall second-quarter earnings below analyst expectation,” Van Tartwijk reports.

“The bank's shares tumbled 5.9% in Zurich to 10.29 francs,” he adds.

Click here to read the full report.

(H/T: Newser), All photos courtesy The Associated Press