Nasdaq May Compensate for FB Fiasco - Analyst Blog
08 Giugno 2012 - 4:58PM
Zacks
In an attempt to compensate for the failure of Facebook
Inc.’s (FB) initial public offering (“IPO”),
Nasdaq OMX Group Inc (NDAQ) promised to pay $40
million to the trading firms that incurred losses due to the
technical hitch occurred on the IPO day. It agreed to make a cash
payment of $13.7 million. The balance was to be remitted by
subsidizing the trading fees of the concerned investors for the
next six months.
Nasdaq would compensate for the losses that were incurred under
the circumstances when orders to sell at $42 or less didn't
execute; orders to sell at $42 or less went through at a lower
price, and buy orders at $42 weren't immediately confirmed.
However, Nasdaq’s decision to recompense awaits the approval of
regulatory bodies including the Securities and Exchange Commission
(SEC). This is because exchanges as big as Nasdaq are prohibited
from paying a compensation toward trading losses exceeding $3
million in a month.
Moreover, the company’s decision to reduce the trading fees for
the next few months have been highly criticized by its arch rival
NYSE Euronext (NYX), which believes that such
initiatives promote unhealthy competition among the market players.
Also, it is concerned that investors would be more interested to
trade on Nasdaq for receiving refunds and getting the advantage of
discounted trading fees.
Following this incident, we expect Nasdaq to be more thorough in
dealing with high-profile IPOs such as Facebook by rectifying such
technical snags in advance. Along with the outflow of huge money as
compensation, these incidents have the potential to put its
reputation at stake. The reimbursement might be attractive to
investors in the near term, but it may have an unfavorable impact
on the company’s reputation going forward.
Nasdaq currently retains a Zacks #5 Rank, which translates into
a short-term Strong Sell rating.
FACEBOOK INC-A (FB): Free Stock Analysis Report
NASDAQ OMX GRP (NDAQ): Free Stock Analysis Report
NYSE EURONEXT (NYX): Free Stock Analysis Report
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