The repercussions from Facebook’s botched initial public offering deepened on Thursday as Fidelity Investments found itself dealing with "thousands" of customers with order problems and Knight Capital demanded tens of millions of dollars in compensation from Nasdaq for trading-related losses.
The pressure on Nasdaq in particular was intense, not only from investor lawsuits and angry customers, but from the outside prospect it could lose the Facebook listing entirely after having just obtained it.
Facebook shares added a penny to $32.01 in mid-day trading, but action on its stock has essentially become secondary to the fallout over the IPO -- its price, its size, its execution and questions about selective disclosure of its financial prospects.
Advisers familiar with the situation at Fidelity said many investors are now finding out, nearly a week after the fact, that their orders were not executed at the prices they thought.
Fidelity, in a statement, said it was working with regulators and market makers on its clients’ issues "and we will continue to do so until we are confident that Nasdaq has done everything it can to mitigate the impact to our customers."
Knight Capital’s claims could end up dwarfing the Fidelity issues, though. The amount of compensation sought by Knight, a leading market maker in U.S. equities, is nearly three times what Nasdaq has aside as compensation for trading losses. "They are certainly facing the specter of some significant lawsuits if this pool is not enough," a source familiar with Knight’s situation said.
Other firms said they did not have similar problems, though, raising questions about the scope of the losses. “The problems were where people were trying to cancel orders; we didn’t have that," said Peter Boockvar, equity strategist at Miller Tabak & Co in New York. "Because we didn’t have a problem doesn’t mean there weren’t problems."
Shares of Nasdaq fell 14 cents to $21.67 in afternoon trading. As of mid-day Thursday the stock was down nearly 6 per cent from its last close before the Facebook debacle.
Over the same period NYSE Euronext is down just 0.2 per cent.