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Nasdaq Fined $10M Over Facebook IPO Failures

Soulskill posted about a year ago | from the doling-out-wristslaps dept.

Facebook 91

twoheadedboy writes "Nasdaq has been fined $10 million by the U.S. Securities and Exchange Commission over 'poor systems and decision-making' during the Facebook initial public offering. When Facebook went public on 18 May 2012, it was hoping for a major success, but technical glitches and poor decision making at Nasdaq caused real problems. The SEC said 'a design limitation' in the system to match IPO buy and sell orders was at the root of the disruption, thought to have cost investors $500 million. Orders failed to register properly, leaving banks like Citigroup and UBS in the lurch and making additional, unnecessary bids. They may still win money back from Nasdaq if legal challenges go their way."

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Note the discrepancy (5, Insightful)

Anonymous Coward | about a year ago | (#43853771)

The SEC said 'a design limitation' in the system to match IPO buy and sell orders was at the root of the disruption, thought to have cost investors $500 million.

Nasdaq has been fined $10 million by the U.S. Securities and Exchange Commission over 'poor systems and decision-making' during the Facebook initial public offering.

And people wonder why the average person hates the very idea of the stock market.

Re:Note the discrepancy (2)

ranton (36917) | about a year ago | (#43853795)

Large lawsuits are already in the works. I assume that this fine makes it easier for the plaintiffs to show Nasdaq did do something wrong, but IANAL. I doubt that Nasdaq will get off this easy.

Now we just need to punish the people who valuated Facebook so high.

Re:Note the discrepancy (1)

Anonymous Coward | about a year ago | (#43853881)

Now we just need to punish the people who valuated Facebook so high.

You mean like the hundreds of millions of users it has and who still value the service to the point where major established companies are bending over backwards to fit Facebook into their marketing schemes? Huh. Weird, I can't tell if that's more misanthropic or solipsistic of you.

lol, why don't you join us in the real economy (1)

Anonymous Coward | about a year ago | (#43854115)

Where tangible things of real value are commodities, and not just hype.

Re:Note the discrepancy (3, Insightful)

ranton (36917) | about a year ago | (#43854135)

Now we just need to punish the people who valuated Facebook so high.

You mean like the hundreds of millions of users it has and who still value the service to the point where major established companies are bending over backwards to fit Facebook into their marketing schemes? Huh. Weird, I can't tell if that's more misanthropic or solipsistic of you.

Are you being serious? Considering Facebook's stock started at $38 and is now $23, and it took less than a week to lose 25% of its value, the only people being misanthropic or solipsistic are the ones who thought Facebook was worth such as ridiculous P/E ratio in the first place. Or the people who took advantage of the more weak minded traders who wanted another get rich quick scheme by buying an IPO they just expected to double in value over the first week.

Re:Note the discrepancy (0)

Anonymous Coward | about a year ago | (#43854275)

so smart people got rich and dumb people suffered... whats new?

Re:Note the discrepancy (0)

Anonymous Coward | about a year ago | (#43857247)

the ones who thought Facebook was worth such as ridiculous P/E ratio in the first place

You mean Facef**k itself? Right?

  ""major established companies are bending over backwards to fit Facebook into their marketing schemes?""

If it wasn't for these idiot companies jamming FaceF**k in everyone's eyes, you have to ask yourself if the IPO would even have existed. I am not disagreeing with you comment. But FaceBook and the goons that priced, marketed, the IPO should both be seeing fines, to just let Facebug off the hook shows how our government has no problem blaming everyone else but god forbid you nail the parent company, you know they had a heavy hand with there billions to get this priced up.

Re:Note the discrepancy (2)

X.25 (255792) | about a year ago | (#43854967)

You mean like the hundreds of millions of users it has and who still value the service to the point where major established companies are bending over backwards to fit Facebook into their marketing schemes? Huh. Weird, I can't tell if that's more misanthropic or solipsistic of you.

Millions of flies can not be wrong either.

Re:Note the discrepancy (1)

Alioth (221270) | about a year ago | (#43858889)

> solipsistic

You keep using that word. It does not mean what you think it means.

Re:Note the discrepancy (2)

MozeeToby (1163751) | about a year ago | (#43853887)

Now we just need to punish the people who valuated Facebook so high.

Why? I could go out on the street and sell lemonade for $100 a cup. With enough work I could probably find a famous person or two to tell the world that the lemonade is so good it's totally worth it. How is it my fault if there are enough idiots out there for me to make a profit?

Re:Note the discrepancy (1)

phorm (591458) | about a year ago | (#43853997)

Maybe if the lemons were mixed with certain illicit substances.
Heck, that would probably make it very popular in Hollywood...

Re:Note the discrepancy (0)

Anonymous Coward | about a year ago | (#43854201)

Is it served in a Gothic themed silver chalice?
That may sell at $100 if you can keep the cup.

Re:Note the discrepancy (2)

trum4n (982031) | about a year ago | (#43854297)

You can't keep the cup. However, there are some "leaked" ones popping up on ebay... Oh, exclusive things magically have value.

Re:Note the discrepancy (0)

Anonymous Coward | about a year ago | (#43856969)

You can do no such thing. You would be breaking about 15 international regulations. 25 local ones. 40 laws regarding the selling of lemonade. You would need licensing fees. And impact fees. And your lemonade would need to be certified. If you sold organic lemonade. They would just shoot you on the spot.

Re:Note the discrepancy (1)

You're All Wrong (573825) | about a year ago | (#43864735)

Because your lemonade sales aren't stricty regulated. Unlike speculative "investments".

The whole IPO was clearly a "bigger idiot" scam. $10M is a joke. Fines (plural, there were many culpable parties) should be an order of magnitude bigger than that.

Re:Note the discrepancy (5, Informative)

Score Whore (32328) | about a year ago | (#43854223)

The more fundamental problem was NASDAQs inability to carry the trades so that people who were interested in trading FB stock were entirely unable to receive market indicators of the value of the stock nor were they able to modify trades. It's known that trades were cancelled shortly after FB began trading yet due to the exchanges issues the trades were settled hours later regardless of the cancellation.

Re:Note the discrepancy (0)

Anonymous Coward | about a year ago | (#43858173)

... trades were cancelled shortly after FB began trading ...

So businesses that tried High-frequency trading to get insider knowledge had to pay-up. Sounds good!

Or dumb businessmen who suddenly realized that FaceBook was diving into the toilet couldn't save their money.

Re:Note the discrepancy (5, Insightful)

mspohr (589790) | about a year ago | (#43854241)

"Now we just need to punish the people who valuated Facebook so high."

I just don't understand this logic.
In retrospect, Facebook was priced "high" but still had lots of greedy people clamoring to buy it at that price.
Who should we punish?
- The greedy people who thought they would make a killing by flipping the stock?
or
- The greedy people at Facebook who priced the IPO to maximize revenue?

Nobody forced anyone to buy the stock. Nobody committed fraud by hiding material facts.
This is just a clusterfuck of greedy people. NASDAQ did screw up and made it harder for the greedy buyers to get in or get out and make profits. NASDAQ should pay for these screwups... and $10 million is peanuts.
I will enjoy watching all of these greedy people fight over money.

Re:Note the discrepancy (1)

dywolf (2673597) | about a year ago | (#43856777)

exactly.
the stock market is not a zero risk game. they took a risk by valuing it higher than many people were saying was advisible.
and in the end, the market did it thing, punished a lot of them, and then recovered with some very decent gains for people who saw the bubble that was coming and were patient enough to ride it out.

Re:Note the discrepancy (1)

saveferrousoxide (2566033) | about a year ago | (#43916597)

Nobody committed fraud by hiding material facts.

Actually, that is exactly the stated problem [thedailybeast.com] ; though, not surprisingly, Facebook denies any such thing. Reports came to light that information was selectively released in the days before the IPO and that the IPO was inappropriately priced based on that information.

Re:Note the discrepancy (3, Insightful)

DarkOx (621550) | about a year ago | (#43854751)

Now we just need to punish the people who valuated Facebook so high.

Why? the market did that for you. The people who valued facebook that high at the end of the day are the ones who agreed to pay the $38 dollar IPO price. They now own shares worth ~$23.50. Isn't that punishment enough?

It was mostly big institutional investors too, probably could not happened to a more deserving bunch.

Re:Note the discrepancy (0)

Anonymous Coward | about a year ago | (#43859375)

Large lawsuits are already in the works. I assume that this fine makes it easier for the plaintiffs to show Nasdaq did do something wrong, but IANAL. I doubt that Nasdaq will get off this easy.

Now we just need to punish the people who valuated Facebook so high.

Once that's done, we should punish all of the buyers for driving a system beyond its capabilities to purchase stock so that the majority of them could overwhelm the system on the same day or next by selling.

Wait, now there's an idea. Let's raise the income tax to 60% on day traders [wikipedia.org] .

Re:Note the discrepancy (1)

Anonymous Coward | about a year ago | (#43853841)

Why would the average person care if it was 10 dollars or 10 billion? They never see a dime of it even if they're share holders.

The problem with big fines is that it goes to a government that has already displayed that they don't care about a tax payer's ROI... they just do whatever they want.

Big fines don't make me feel better. It's just cash between one con artist to another con artist.

Re:Note the discrepancy (1)

game kid (805301) | about a year ago | (#43854055)

Well, this is the exchange that had Madoff as its chair. Draw your own concs.

Re:Note the discrepancy (0)

Anonymous Coward | about a year ago | (#43854141)

concs? really? wow. just wow.

Re:Note the discrepancy (0)

Anonymous Coward | about a year ago | (#43854527)

Draw your own concs.

done [amazonaws.com]

Re:Note the discrepancy (0)

Anonymous Coward | about a year ago | (#43854597)

You're only at 77 characters. Blow just a few more bits of your download cap to write the word in full.

Re:Note the discrepancy (5, Insightful)

Impy the Impiuos Imp (442658) | about a year ago | (#43854483)

> And people wonder why the average person hates the very idea of the stock market.

The average person does not hate it. Just your own little moral online tribal society hates it, where you reinforce to each other statements about the awfulness of this or that vis-a-vis politics, in support of a meme-based amalgam of people looking for power themselves.

Re:Note the discrepancy (1)

johnjaydk (584895) | about a year ago | (#43854559)

The average person does not hate it. Just your own little moral online tribal society hates it, where you reinforce to each other statements about the awfulness of this or that vis-a-vis politics, in support of a meme-based amalgam of people looking for power themselves.

I completely agree; it doesn't matter that some average yahoo hate the stock market. What matters is that most firms and investors now consider the stock market so rigged that it doesn't serves its original purpose. Therefore they no longer participates. That's the real problem.

Re:Note the discrepancy (0)

Anonymous Coward | about a year ago | (#43855505)

citation?

Re:Note the discrepancy (0)

Anonymous Coward | about a year ago | (#43856909)

> And people wonder why the average person hates the very idea of the stock market.

The average person does not hate it. Just your own little moral online tribal society hates it, where you reinforce to each other statements about the awfulness of this or that vis-a-vis politics, in support of a meme-based amalgam of people looking for power themselves.

The average person definitely hates it, doesn't really participate in it except to get railed by it, and just lost his retirement and had his job shipped overseas because of it.

Re:Note the discrepancy (1)

Anonymous Coward | about a year ago | (#43858451)

The average person doesn't give two shits about the stock market.

And the average person still has their job. Even at the height of the recession.

Re:Note the discrepancy (0)

Anonymous Coward | about a year ago | (#43862593)

lolwut? Dood I'm a common slashdot reader with ADD. Please speak plain english with a poorer
vocabulary.

Re: Note the discrepancy (0)

Anonymous Coward | about a year ago | (#43854561)

10 million seriously that's chump change

Re:Note the discrepancy (0)

Anonymous Coward | about a year ago | (#43854867)

The SEC said 'a design limitation' in the system to match IPO buy and sell orders was at the root of the disruption, thought to have cost investors $500 million.

Nasdaq has been fined $10 million by the U.S. Securities and Exchange Commission over 'poor systems and decision-making' during the Facebook initial public offering.

And people wonder why the average person hates the very idea of the stock market.

Exactly. I grow very tired of hearing of profits in the billions, with fines in the millions. Although not exactly a comparison with these figures, the delta between the fine and the robbery (let's call it what it is in most cases, stop bullshitting) is so pathetic that the crooks can pull out their personal wallet to pay it.

The only thing worse is seeing a hefty fine with the words "admit no wrongdoing" attached to it, in which the delta is usually even larger, and of course results in no one actually being punished with jail time.

Re:Note the discrepancy (1)

dywolf (2673597) | about a year ago | (#43856607)

no.

the average ignorant person hates the idea of the stock market.
the average intelligent person loves the idea of the stock market.

the average intelligent person hates the winkwinknudgenudge slap on the wrist punishments of the people tasked with being its watchdogs.

Re:Note the discrepancy (1)

khallow (566160) | about a year ago | (#43857319)

And people wonder why the average person hates the very idea of the stock market.

Because if stock markets didn't exist, then rich people wouldn't have a way to pay/bribe governments for services rendered. I imagine the average person doesn't hate so much the wealth that they've received from stock markets. It kind of makes their hate a bit meaningless.

Re:Note the discrepancy (0)

Anonymous Coward | about a year ago | (#43863689)

Because if stock markets didn't exist, then rich people wouldn't have a way to pay/bribe governments for services rendered.

Nah, rich people will always find a way to pay/bribe government. Stock market is just one (current) tool they use.

I imagine the average person doesn't hate so much the wealth that they've received from stock markets.

I imagine the average person don't hate the wealth they receive from the stock market the same way I don't hate the million dollars I received from you: can't hate what does not exist/did not happen (but hey, if you want me to start hating, send your million dollars to Hating Dude at 742 Evergreen Terrace Springfield...)

I imagine the average person is not very capable at avoiding onerous fines, fees, and taxes (not as much as those above them, otherwise they'd be richer) from government and other rent seekers. I imagine the the average person is not the wisest spender either, and have various inefficiencies in their spending habits.

In other words, I imagine the average person has relatively little disposable income to put into savings and investment... that is, IF they put it into that.

I imagine the average person, particularly the average American, is not a saver. I imagine the average person will spend away most of their disposable income on instant gratification, not long term investments and retirement savings.

I imagine the average person observes various costly social rituals. Birthdays, weddings, the pagan consumerist frenzy that spans from Black Friday to around the 25th of December (which coincides with some religious thing IIRC), etc.

I imagine the average person would have accumulated sizable debt to satiate his consumerist thirst.

I also imagine the average person are beings of average luck, and they will find themselves getting into unlucky and costly situations (but average luck doesn't make them win the lottery or anything, the "average" is not that good). An accident here, an illness there, a natural disaster, etc. I imagine whatever savings they did manage to accumulate gets periodically reset because of these unfortunate events.

I also imagine the average person are victims to their own moral self-righteousness. I imagine they guilt themselves and/or each other into giving up their money towards "good" causes, even when they are living from paycheck to paycheck. Best case they donate to private charities (but that still doesn't help their savings and investment). Worst case they throw money at some politically motivated feel good initiative (which would hurt society's savings and investments when the government initiative actually harms the economy as a whole)

Pocket change (-1)

Anonymous Coward | about a year ago | (#43853807)

$10 million ? Don't make me laugh
http://www.youtube.com/watch?v=K7Nj65PddFs

Re:Pocket change (0)

Anonymous Coward | about a year ago | (#43854117)

It's a fucking music video you idiot.

$10M? That's it? (-1)

Anonymous Coward | about a year ago | (#43853825)

There's more than that in their couch cushions.

insiders got burned (1)

anthony_greer (2623521) | about a year ago | (#43853857)

Funny how the government can come down on a company when its the insiders that get screwed - Come n, joe q investor cant get hot IPOs like Facebook, its either employees and founders (which is OK) or big mega banks that set the deals up that end up getting the IPO shares and selling at the spiked post IPO price.

Re:insiders got burned (3, Insightful)

the eric conspiracy (20178) | about a year ago | (#43854071)

It depends what you mean by Joe q investor, but it is possible for a lot of people.

https://eresearch.fidelity.com/eresearch/ipo/ipocalendar.jhtml#eligibility [fidelity.com]

But really you don't want to mess with that sort of thing. Sound investing isn't about gambling with hot ipos. It's about using sound principles of portfolio management, diversification and risk management, and keeping management costs down.

http://online.wsj.com/article/SB10001424127887323475304578502973521526236.html [wsj.com]

Re:insiders got burned (1)

Pubstar (2525396) | about a year ago | (#43855393)

What if you buy the new hot ipo and then immediately short the stock?

Re:insiders got burned (1)

the eric conspiracy (20178) | about a year ago | (#43856113)

Shorting involves borrowing some stock, selling it to a buyer then and in the future replacing the borrowed stock by buying it at a (hopefully) lower price. Your profit is the selling (current) price minus the lower future price.

 

Re:insiders got burned (3, Informative)

smellotron (1039250) | about a year ago | (#43857201)

What if you buy the new hot ipo and then immediately short the stock?

"Buying the IPO" is just buying stock in the IPO auction. "Shorting" the stock means selling stock which you do not own. So if you buy the IPO and then immediately sell, you're not actually shorting it. This is high-risk day trading, and not an activity recommended for Joe Q. Investor. Not to mention that the high IPO price for FB seems to have been crafted to punish traders expecting an "IPO pop".

Now, suppose you wanted to sell more than you initially bought. Then, the excess sell quantity actually is "short", and you must confirm the ability to borrow the stock from e.g. your broker or some other large institution. If you do not confirm the ability to borrow, then you are shorting "naked" which is not permitted. Because everyone is in this situation on IPO day, you will probably have a hard time finding someone to borrow from without paying out the nose for the "stock loan".

Re:insiders got burned (1)

Pubstar (2525396) | about a year ago | (#43857327)

Thanks for the info. Would mod you up, but since I already posted... Well hopefully a thanks for the info without being condensing will have to do.

Re:insiders got burned (0)

Anonymous Coward | about a year ago | (#43858197)

Once you realize that stock without dividends is just a pyramid scheme investing becomes simpler.

They should THANK Nasdaq (2)

damn_registrars (1103043) | about a year ago | (#43853895)

The delays caused the investors to lose less money than they would have lost otherwise. Had things been happening at maximum speed people would have come to realize even sooner that facebook was wildly overvalued and the market correction would have driven the price even lower. Instead it only lost around half of its value on opening day.

Re:They should THANK Nasdaq (3, Informative)

GodfatherofSoul (174979) | about a year ago | (#43854295)

Check out that tractor beam YouTube video. I don't understand the mechanics, but someone was dumping a lot of money into keeping that stock price up.

Re:They should THANK Nasdaq (3, Informative)

Swistak (899225) | about a year ago | (#43856193)

It's called underwriting - when stock goes public, it usually has one or more major banks as underwriters which are required to keep stock at certain price (not neceserilly a IPO price, limit can be lower). Company can go public without it, but most big IPOs have that option.
It's a system designed to avoid "flops" and for more realistic IPO prices. If underwriter values stock to high they have to spend money buying that stock.
Usually there's time and/or a value limit (so we'll prop up price fo x days, or we'll spend Y$ to keep it above Z$)

Re:They should THANK Nasdaq (1)

DavidGMan (2921909) | about a year ago | (#43857479)

There is an exception under the US Securities laws against market manipulation that allow an IPO's underwriters to make a "stabilizing bid" (IPO price) to keep a stock from falling as a "market" is created for the new issuance. Needless to say they did not support the stock after the first day of trading :) http://www.investopedia.com/terms/s/stabilizingbid.asp [investopedia.com]

Re:They should THANK Nasdaq (2)

steelfood (895457) | about a year ago | (#43854875)

No, you're thinking of the little guy who would've bought into the hype. The SEC is thinking of the institutional investors who put money into FB before the IPO who would've sold high on the hype (and still did, to a large extent).

Re:They should THANK Nasdaq (1)

smellotron (1039250) | about a year ago | (#43857249)

The delays caused the investors to lose less money than they would have lost otherwise.

The IPO was around $38, and I heard of friends who had buy market orders executed near $43. Certainly a bad decision on their part, but it seemed that the delays did have some price impact. Other organizations that had orders remain unacknowledged may have submitted additional orders to buy at a high price, without realizing that they were effectively going to get double-filled. Now, it's not NASDAQ's fault that my friends used market orders, or that institutions sent more orders than they actually wanted to get filled... but when the most stable, consistent US equity exchange is having downtime for hours it is hard to justify putting the egg in everyone else's face and not the exchange's own.

Why bother? (2, Insightful)

Anonymous Coward | about a year ago | (#43853901)

A 10 million fine on the scale of these companies is NOTHING... the paperwork to pay it costs as much as the fine...

Once they get to this 'too big to fail' state... any fine under a billion dollars is nothing. You're just wasting everyones time.
Either correct the fine so that the company will notice and will change.. Or just ignore it.

This half assed way of doing things we use right now is pointless.

stop it.

Re:Why bother? (0)

Anonymous Coward | about a year ago | (#43854099)

The fines are set by law. A law written by Congress. A Congress bri...lobbied by the industry that "informs" Congress that fines should be proportionate to the transgression. Mixed with old farts that still think 10 million dollars is a lot of money - to those people anyway - and you have these chump change fines that leave no incentive for Wall Street types to act ethically, let alone within the law.

Whenever I hear folks wanting to jump on an IPO, I just say see "Facebook" and "Groupon" before "investing". And if you subscribe to the Greater Fool theory of investing, just bear in mind that you more than likely will by the fool holding the bag - see dot com and this past real estate bubbles.

Re:Why bother? (4, Interesting)

tazan (652775) | about a year ago | (#43854415)

According to the article NASDAQ made 10.8 million profit by shorting Facebook in just one of their rule violations. So they aren't even getting fined as much as the profits they made violating the rules.

Re:Why bother? (1)

smellotron (1039250) | about a year ago | (#43857475)

According to the article NASDAQ made 10.8 million profit by shorting Facebook in just one of their rule violations.

Yeah, holy shit. No exchange should have trading accounts, least of all the listing exchange; that is a clear conflict of interest. Those profits should be disgorged.

How do you value a "FaceBook"? (1)

bkmoore (1910118) | about a year ago | (#43853959)

The question is how do you accurately value a company with an unproven business model and no clear profit lines? Also considering that this company has had a whole legion of predecessors who had the same idea, but failed for one reason or another to become profitable or sustainable.

Re:How do you value a "FaceBook"? (0)

Anonymous Coward | about a year ago | (#43854197)

It's difficult to value companies with new business models. I can't tell if you're being sarcastic or not, but you could start by taking a look at analyst targets:

http://finance.yahoo.com/q/ao?s=FB+Analyst+Opinion [yahoo.com]

It looks like the median target of $34 which is much higher than the current price of $23.32, so you might want to consider picking some up.

Re:How do you value a "FaceBook"? (1)

damn_registrars (1103043) | about a year ago | (#43854235)

It looks like the median target of $34 which is much higher than the current price of $23.32, so you might want to consider picking some up.

The analysts have been perpetually wrong on their targets for facebook. They originally forecast that it would double in value on the day of the IPO; instead as I and many others expected it lost nearly half of its value on that day. If anything one should be placing bets on the stock to lose more value as they don't have a good path to profitability and their "smart" phone (along with several other big announcements) was a massive bucket of fail.

Re:How do you value a "FaceBook"? (1)

InsectOverlord (1758006) | about a year ago | (#43854757)

It looks like the median target of $34 which is much higher than the current price of $23.32, so you might want to consider picking some up.

They originally forecast that it would double in value on the day of the IPO.

[Citation needed]

Most analysts I read at the time suggested a "Wait-and-see" stance. A few (most of them associated with the underwriters, or otherwise with vested interests) rated the stock as a buy, but only Joe Bloggs types forecast it would double.

Re:How do you value a "FaceBook"? (4, Insightful)

fuzzyfuzzyfungus (1223518) | about a year ago | (#43854569)

Just remember: An 'analyst' is somebody who can make more money by selling advice on investing than he can by investing according to his own advice...

Re:How do you value a "FaceBook"? (1)

Sarten-X (1102295) | about a year ago | (#43855511)

Or they could do both, and make even more money, or they could have several different perspectives, each based on a particular set of circumstances, most of which don't apply to them personally.... but yeah, let's go ahead and mock the service sector!

Re:How do you value a "FaceBook"? (1)

DavidGMan (2921909) | about a year ago | (#43856217)

Sounds like any profession for the average person (of more limited means) where you are better off working for someone else, as only limited economic gain in working for yourself versus a "psychic" analogy. Trades consume a decent amount of money and often take some time to develop. Maybe that could be an idea for a future site/platform to track the performance of their recommendations, even if the wise people read their research and ignore their recommendations.

Re:How do you value a "FaceBook"? (2)

tompaulco (629533) | about a year ago | (#43854523)

The question is how do you accurately value a company with an unproven business model and no clear profit lines? Also considering that this company has had a whole legion of predecessors who had the same idea, but failed for one reason or another to become profitable or sustainable.

Take all the subscribers, assume 20% growth in subscribers per year, factor in for interest, compounded continuously. Then take the resultant number and multiply by zero.

Re:How do you value a "FaceBook"? (1)

Dachannien (617929) | about a year ago | (#43859199)

Take all the subscribers, assume 20% growth in subscribers per year, factor in for interest, compounded continuously. Then take the resultant number and multiply by zero.

Oh, multiply by zero. Our bad.

- NASDAQ

Re:How do you value a "FaceBook"? (1)

stymy (1223496) | about a year ago | (#43856799)

You don't accurately value them. That's why IPO's are risky, no one is sure if the price is good or not, so it's a win big, lose big kind of thing. However, keep in mind that the wealth of data Facebook collects is very valuable and useful in the age of Big Data.

Re:How do you value a "FaceBook"? (1)

poofmeisterp (650750) | about a year ago | (#43859393)

The question is how do you accurately value a company with an unproven business model and no clear profit lines? Also considering that this company has had a whole legion of predecessors who had the same idea, but failed for one reason or another to become profitable or sustainable.

Because this one has more ads and marketing crap bundled into it. Just my opinion.

Don't you mean made investors $500 Million? (2)

cnaumann (466328) | about a year ago | (#43854043)

Because when you average it all out, no one really lost anything.

Re:Don't you mean made investors $500 Million? (-1)

Anonymous Coward | about a year ago | (#43854305)

God I love all the angry little narrow-minded engineers that come to slashdot.

Lemme get this straight (2)

Opportunist (166417) | about a year ago | (#43854125)

We overvalued FB by some margin and then some, didn't realize we're essentially scryers looking into our crystal balls that display models that we built, for people like us, who believe these schemes to be true (and hence make them true, as long as petty things like market or reality don't butt in), we lost money because we're too dumb to realize our models have nothing to do with reality and once they hit reality they crumble.

But it's all Nasdaq's fault for doing ... uh ... what exactly? Not allowing us to blow away our money fast enough? Because that's essentially the "mistake" Nasdaq made. But hey, maybe that's required for the scheme to work, because the only thing that would've kept FB share values up was money artificially pumped into it to inflate it.

So yes, Nasdaq is to blame. They didn't let us play the market like we usually do, sue their pants off 'em!

Re:Lemme get this straight (4, Informative)

the eric conspiracy (20178) | about a year ago | (#43854153)

Wrong.

The problem is that Nasdaq wasn't able to deliver trade confirmations to brokerage houses and institutional buyers. This caused these organizations to try to place multiple orders that they didn't actually want, and it contributed to price uncertainty in the market.

Re:Lemme get this straight (1)

SpaceLifeForm (228190) | about a year ago | (#43856067)

There was no price uncertainty whatsoever. Only the clueless thought it would go up. The naked short selling led to the problems. If the IPO had started around $28, there would not have been a problem. But, $38 was way too much, and it was an obvious short play before it started. When most of the trades where shorts, and there were few buyers, hell yeah, you are not going to get confirmation of a short sale until some buyer comes in, otherwise they would all be naked short sales.

Re:Lemme get this straight (2)

smellotron (1039250) | about a year ago | (#43857337)

When most of the trades where shorts, and there were few buyers, hell yeah, you are not going to get confirmation of a short sale until some buyer comes in, otherwise they would all be naked short sales.

This demonstrates some solid misunderstanding of what happened on a technical level. Nobody sends trades to the exchange: they send orders. The exchange will acknowledge that orders are accepted by the system, and will send further acknowledgments if the orders execute. An acknowledgement should arrive within milliseconds of placing the order, even if the order does not immediately execute; it will "rest in the book". If you change your mind, you can request to cancel a resting order, but it is possible that by the time your cancel request arrives at the exchange, the order has already been filled (by arbitrageurs, most likely!)

The big institutional buyers did not receive their order acknowledgments... so they sent more orders. Then, several hours later, acknowledgments and executions arrived for both sets of orders! Well, it's extremely dangerous to continue trading in a situation like this, they found out the hard way, and now they're trying to recoup their losses directly from NASDAQ. Note that someone besides NASDAQ must have been on the other side of that execution, and that counterparty probably isn't planning on returning their windfall profits to the exchange so that the exchange can pay out the losers.

Re:Lemme get this straight (1)

Comrade Ogilvy (1719488) | about a year ago | (#43854587)

Nasdaq made explicit and implicit promises to many kinds of people. They failed to deliver. Even if damages are hard to evaluate, the SEC has to take some kind of action for that manifest failure. The courts are available for figuring out other details.

While this affair is not going to get the SEC covered in laurels, doing nothing was never a reasonable option.

Want to Avoid this problem (2, Interesting)

Anonymous Coward | about a year ago | (#43854239)

Don't go public to begin with. Screw the idea of shareholders. Once you go down that road, you no longer "own" your company. You operate at the largesse of the shareholders, who are only interested in money. Money, in the long run, is the poorest of motivators for success.

The taint of Goldman Sachs (4, Insightful)

GodfatherofSoul (174979) | about a year ago | (#43854323)

Once they got in and started floating that insane value for Facebook pre IPO, it should've been obvious to investors that the fix was in. If you see GS jumping in on anything, think of it as a neon "Warning: anal rape ahead" sign. Unless, you're privy to the innards of the deal of course...

Why a trading problem with only Facebook? (1)

MetalOne (564360) | about a year ago | (#43854513)

What I don't understand, is why would trading be different for Facebook than every other stock on the exchange? Don't they just add the symbol to the database and then it trades like everything else. The fact the only Facebook was glitched seems to imply either a very sloppy system for initializing the software with a new symbol or there was some sort of malfeasance being employed with just this stock.

Re: Why a trading problem with only Facebook? (1)

Anonymous Coward | about a year ago | (#43855011)

When a symbol IPOs, the exchanges generally executes an "IPO cross" which tries to match as many orders as it can at a particular price, and then all executions during the cross execute at that price. So everyone jams in their bids/offers whether they be market or limit orders before the symbol starts trading, and the matching engine will calculate a price at which the most volume will be executed.

Presumably what happened is the execution reports that were supposed to be sent back to the firms when the cross happened didn't actually get sent for whatever reason, and firms who had entered orders did not know their orders had been executed during the cross.

It's also worth noting these crosses also generally happen when the market opens, closes, or re-opens after a halt

Re:Why a trading problem with only Facebook? (2)

InsectOverlord (1758006) | about a year ago | (#43855187)

This was covered by many sources (for instance, Computerworld [computerworld.com] ). Apparently the process that failed was the Nasdaq IPO Cross [nasdaqtrader.com] .

Re:Why a trading problem with only Facebook? (0)

Anonymous Coward | about a year ago | (#43857539)

Yeah but the IPO volumes were still low. We're talking about 500 000 orders. A well designed system should be able to handle this in 2-3 seconds, it's not like matching orders is a very complicated algorithm... It's still unclear why it took so long. Heard their system is written in java...

Wow, 10M (0)

Anonymous Coward | about a year ago | (#43854517)

So about that what nasdaq trades in the smallest amount in which time can be measured...?

Remedy (0)

Anonymous Coward | about a year ago | (#43854677)

A good swift kick in the Nadsaq

Only some of the story (1)

SkOink (212592) | about a year ago | (#43855111)

Why is it that whenever people talk about how this-or-that stock market action has "cost investors millions"? It's not like the money was lit on fire. It either never existed in the first place, or somebody won big off of somebody else's poor decisions. Isn't stock trading a zero-sum game by definition?

Fake "Market" (1)

Moppusan (2837753) | about a year ago | (#43855425)

I've never understood the stock market and never will. It feels completely fake to me, like a real-money MMO. It's like a rigged game where most people get shit on and the elites get all the loot. Let's all pretend we're "buying" a part of a company! Maybe it was a good idea at one point, but it's just a big joke now.
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