This Trader Lost $35 Million on Facebook’s IPO
Knight Capital Group (NYSE:KCG) has said it is facing pre-tax losses of up to $35 million on trading on the Facebook (NASDAQ:FB) IPO on Friday and is asking Nasdaq’s holding company for compensation equaling that amount.
The electronic trader said in a regulatory filing that it was “evaluating all remedies available under law,” including having submitted documents to the Nasdaq OMX Group (NASDAQ:NDAQ), which plans to pay back some losses related to the glitch-ridden IPO.
On the opening day of trading for Facebook shares, technical issues with Nasdaq’s trading system resulted in investors being unable to find out if their new orders, changes, and cancellations in a 20-minute period for buying and selling the company’s stock went through. Some brokers were not aware of results until Monday. The Wall Street Journal has estimated total industry losses related to the problems at $100 million.
“There are no assurances that the company will be able to recover any of its losses resulting from the numerous issues and problems at NASDAQ relating to the trading of Facebook,” Knight wrote in its filing. “As a result of this loss, the Company’s second quarter results of operations will be adversely impacted.”
Knight Capital’s stock has dropped nearly three percent over the last week and is currently down 0.80 percent at $12.34.
“The failure was Nasdaq’s,” Knight’s CEO Tom Joyce told CNBC. “This was arguably the worst performance by an exchange on an IPO ever.”
Knight is a major handler of stock orders from retail investors. Facebook stock has also struggled in the days following the IPO. A Bloomberg report says the value of the social network’s stock bought by retail investors for $38 in the IPO has dropped by at least $630 million in total, based on the closing price of $32 on Wednesday and assuming investors held on to the stock.
The Financial Industry Regulatory Authority, the U.S. Securities and Exchange Commission, as well as the U.S. Senate are reportedly investigating circumstances related to the IPO.
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