UBS to take legal action against Nasdaq over Facebook IPO

IDG News Service - Swiss bank UBS is planning to take legal action against Nasdaq OMX Group to recoup losses it made related to the Facebook IPO, the company said on Tuesday as it reported its second quarter results.

As a result of "the gross mishandling of Facebook's market debut by Nasdaq" the bank recorded a loss of 349 million Swiss francs (US$356.5 million) in its U.S. equities business during the second quarter, UBS said in a press release.

Technical problems dogged the large share sale by the social networking company.

To recoup its losses, UBS now plans to take appropriate legal action against Nasdaq, it added without detailing what that would include.

One of the reasons for UBS' ire was the way Nasdaq handled pre-market orders. Due to multiple operational failures by Nasdaq, orders were not confirmed for several hours after the stock had commenced trading, according to UBS. To ensure that orders were filled they were entered multiple times before the necessary confirmations from Nasdaq were received and UBS' systems were able to process them, it said.

However, Nasdaq ultimately filled all of the orders, giving UBS far more shares than clients had ordered, according to UBS.

Nasdaq in Europe didn't want to comment on UBS' plan, and Nasdaq in the U.S. didn't immediately reply to questions.

In June, Nasdaq said it planned to set up a $40 million program to compensate companies that  were hit by technical problems that arose during the Facebook IPO in May. That program was augmented to a total of $62 million on July 20 by Nasdaq, who also said that it failed to meet its own high standards when handling the Facebook IPO.

The June proposal called for a majority of the money to be paid via reduced trading costs, but that was changed to an all-cash compensation. But that doesn't seem to be enough to satisfy UBS.

On Monday, Facebook closed at $23.15, compared to the $38 initial share price.

Send news tips and comments to mikael_ricknas@idg.com