McNamee says behavior on Facebook IPO is 'criminal'

The tech investor takes the Nasdaq stock exchange and Morgan Stanley to task on Bloomberg TV over the dissapoint opening day.

As usual, tech investor Roger McNamee didn't hold back today, telling Bloomberg TV that the Nasdaq and Morgan Stanley are to blame for Facebook's IPO bungle as their actions on the stock "bordered on criminal."

McNamee, whose firm Elevation Partners (the private equity firm he co-founded with Bono) invested in Facebook, said the public offering put a spotlight on the "extreme corruption" in Wall Street and the IPO bungle was done on purpose to benefit Morgan Stanley.

"NASDAQ's behavior on this in my mind borders on criminal.I think Morgan Stanley's behavior borders on criminal...this was clearly done on purpose," he said. "You watch what all of these people have been doing in secondary markets. Do you think it is a coincidence that every secondary offering trades down five or six days before the offering. Then they price it down 15%, and then it pops? It sure looks to me like the underwriters are shorting the stocks. What I am saying is i look at all of this and as a 30-year investor, I think people on Wall Street have just so totally lost track of honesty....It is staggering."

McNamee was an early advisor to Facebook. He went on to say that high frequency trading and a lack of regulation of the primary investment of banks is part of the problem. But, on top of those existing elements he said Nasdaq and Morgan Stanley made several mistakes, including allowing people to cancel orders during the quiet period three days before, and not canceling the offering after discovering that the system was working earlier in the morning.

"Let's say for example there are 25 things you have to get right on an IPO. They blew at least 24 of them... So, NASDAQ clearly is at fault for not cancelling and postponing the offering. And, Morgan Stanley is at fault for increasing the size of the deal and price with a complete absence of demand," he said.

McNamee's comments adds to the many voices that have been criticizing Nasdaq for its performance on the opening day of Facebook's stock.

The stock exchange's system breakdown on May 18 spread confusion among traders and caused banks and firms to lose millions of dollars as order confirmations failed and then a wave of panicked cancellations jammed the system.

McNamee said he was "naive" for thinking the IPO was going to go smoothly.

"I was looking at this thinking how could they possibly dare to screw up the largest tech IPO in history," he said. "This is Facebook. They have 900 million members. You blow this and it's out there in the public and eventually the SEC is going to have to look. When they look, all these people are going to have to explain 24 horrible decisions in a row."

McNamee also talked about the need for the tech world to focus on the mobile platform, how Apple will eventually have to face antitrust regulations and how HTML 5 is going to change apps as we know it -- all while plugging his jam band Moonalice.

 

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