Nasdaq & Facebook To Discuss New Terms For Botched IPO

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Nasdaq & Facebook To Discuss New Terms For Botched IPO

In an attempt to compensate the investors who suffered losses, due to technological problems during the Facebook Inc (NASDAQ:FB)’s IPO, Nasdaq plans to release a compensation plan next week, which could probably exceed $40 million, as was originally proposed.

According to sources, the compensation plan will be all cash. Currently Nasdaq is working with the Securities and Exchange Commission on a second draft of the proposal.

The loss in question resulted due to technological glitches with Nasdaq on the opening day of trading for the social networking giant, Facebook. Due to the problem, the first day of trading for Facebook Inc (NASDAQ:FB) kicked off with a 30-minute delay, followed by complains from traders that they are not able to confirm changes, or cancellations made to Facebook orders. Some traders also complained that they received no confirmation of their transaction from the exchange. Some investors estimated the total amount of losses to be around $200 million. Nasdaq has since apologized for the way it handled the deal.

“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.”

Earlier Nasdaq proposed a $40 million plan, which was not appealing to the investors. The original plan included paying $13.7 million in cash to member firms that suffered losses, including the profit it made from first-day trading. The remaining will be in the form of trading discounts.

According to the chief executive officer of Knight Capital Group Inc. (NYSE:KCG), which lost $35.4 million in trading related to the May 18 debut, Nasdaq was responsible for botching up Facebook’s initial public offering, and the exchange owner will learn from its mistakes. Knight Capital reported a fall of 79 percent in their second-quarter earnings report announced yesterday.

Earlier this week, NASDAQ OMX Group, Inc. (NASDAQ:NDAQ), and investors who sued the exchange operator over Facebook Inc’s $16 billion initial public offering, have requested a judicial panel to keep their dispute separate from dozens of related shareholder lawsuits.

Facebook shares have plunged 24 percent since the offering, compared with the Standard & Poor’s 500 Index’s 6.3 percent gain.

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