Nasdaq manages Facebook IPO amid trade confirmation delays

May 18 (Bloomberg) -- While Nasdaq OMX Group Inc. succeeded in delivering Facebook Inc. to public owners, the biggest initial offering of all time was rife with drama.

The pricing of the first transaction following yesterday’s $16 billion stock sale took a half hour longer than Nasdaq’s forecast. About 40 minutes later, the second-largest U.S. equities exchange operator said it was investigating an issue in reporting trades from the opening auction back to the brokerages that made them. Nasdaq later delivered the messages to customers.

Scrutiny of American equity markets intensified in March when Bats Global Markets Inc., the third-largest U.S. stock exchange owner, withdrew its IPO after failing to launch trading on its own platform. While Facebook trading smoothed out after noon in New York, the delayed opening and halts in other companies including Zynga Inc. left investors with mixed impressions following the year’s most anticipated IPO.

“Clearly investors would hit the ‘don’t like’ button,” Matt McCormick, who helps oversee $6.2 billion at Bahl & Gaynor Inc. in Cincinnati, said in a telephone interview. “It’s like Christmas morning and the kids want to open up their presents, but their parents are making them have breakfast first. Everybody is so fixated on Facebook right now that they need immediate gratification.”

The shares advanced 6 percent to $40.28 at 2:09 p.m. in New York after earlier trading at the IPO price of $38, which valued the company at $104.2 billion. Facebook sold 421.2 million shares yesterday.

Underwriter Support

Facebook’s underwriters purchased the company’s stock to keep it from falling below $38, people with knowledge of the matter said. The bankers supported the stock amid Nasdaq’s difficulties delivering trade execution messages, said one of the people, who asked not to be identified because the transactions are private.

Jonathan Thaw, a spokesman for Menlo Park, California-based Facebook, declined to comment.

The IPO price valued the company at 107 times trailing 12- month earnings, more than every Standard & Poor’s 500 Index stock except Inc. and Equity Residential. The valuation also made Facebook, co-founded in 2004 by a then- teenage Mark Zuckerberg, the largest company to go public in the U.S.

Message Delay

Nasdaq said in a statement posted to its website at 11:59 a.m. New York time that it was having a problem delivering trade confirmations related to the IPO. “Nasdaq is working to deliver these executions back to customers as soon as possible,” according to the notice. The company said in a message at about 1:57 p.m. that the delayed messages had been sent. Rob Madden, a Nasdaq spokesman, didn’t respond to requests for comment.

Customers of London-based Fidessa Group Plc, which helps asset managers track transactions, weren’t receiving confirmation of Facebook trades, according to an e-mailed statement. Michael Cianfrocca, a spokesman for Charles Schwab Corp. in San Francisco, wrote in an e-mail: “There are currently industrywide delays in reporting trade executions. These issues do not appear to be unique to Schwab.”

Adding to the initial confusion surrounding the opening trade was a halt in a company that generated 11 percent of Facebook’s $1.06 billion in first-quarter revenue. Zynga failed to trade for almost an hour after being paused by a single-stock circuit breaker, designed to curb volatility when a price swings more than 10 percent in five minutes.

Second Pause

The stock was paused at 11:37 a.m. New York time after dropping as much as 14 percent from yesterday’s close to $7.08. Each circuit breaker is supposed to last five minutes. It resumed at 12:29 p.m., only to be paused again when it rebounded from the earlier decline. The second halt lasted more than an hour.

Dani Dudeck, a Zynga spokeswoman, declined to comment.

Loncor Resources Inc. and Frederick’s of Hollywood Group Inc., both listed by a market owned by NYSE Euronext, and Nasdaq-listed MER Telemanagement Solutions Ltd. were halted at 12:22 p.m. or 12:24 p.m. New York time.

Facebook’s offering came as U.S. equity markets are mired in the worst slump since October. About $1 trillion has been erased from share values this month after speculation Greece will leave the euro region reversed the biggest first-quarter rally since 1998. The S&P 500, down for five straight days before the week’s final session, fell 0.1 percent to 1,304.14.

“It’s good for the market if this thing actually manages to trade up a bit today, and it appears to be doing that,” said Brian Barish, president and chief investment officer of Cambiar Investors LLC, a Denver-based institutional equities manager with $8 billion under management. “It’s been a very gloomy week, a very gloomy market.”

Bloomberg News

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