Nasdaq said to be settling with SEC over Facebook's IPO flop
U.S. regulators are rumored to be discussing a settlement with the stock exchange over an investigation into technical glitches that cost investors millions on the first day of trading.
Dozens of lawsuits and investigations emerged after Facebook's initial public offering on the Nasdaq Stock Market last year. One investigation, initiated by the U.S. Securities and Exchange Commission, focused on technical errors in Nasdaq's system that inadvertently delayed trading that first day.
Now, word has it that Nasdaq may be able to settle the debacle with the federal regulators, according to the Wall Street Journal.
Sources familiar with the matter have told the Journal that Nasdaq has been in preliminary settlement talks with the SEC. If the two sides do make a deal, it will most likely include a financial penalty that could be as much as $5 million. Additionally, the stock exchange will probably be required to take steps to avoid future technical errors.
The SEC initiated the investigation after Facebook's Nasdaq debut last May when technical problems delayed trading for 30 minutes. This delay caused confusion and uncertainty among investors, and some traders were not able to confirm changes or cancellations made to Facebook orders until later in the day. All and all, the glitch cost traders an estimated $500 million in losses, according to the Wall Street Journal.
While Nasdaq has been dealing with angry investors and the SEC, Facebook has been sorting out its own issues. Approximately 50 lawsuits have also been brought against the social network regarding the botched IPO. Defendants in the lawsuits, many of whom are investors, claim that Facebook failed to disclose in the critical days leading up to the IPO that there was "a severe and pronounced reduction" in forecasts for Facebook's revenue growth.
Facebook has maintained it's innocent of wrongdoing and instead placed the blame on Nasdaq, charging that the technical glitches were the source of the decline in share price. Nasdaq's chief executive responded to these claims by saying that "arrogance" and "overconfidence" among the stock exchange's staffers contributed to Facebook's mishandled IPO.
Nasdaq officials have said that the exchange is working on a redesign of its IPO systems in the wake of the Facebook IPO. Aside from possibly paying the SEC a penalty, Nasdaq announced in June that it would also compensate traders and investors for any losses incurred as a result of the glitch.
Even if the SEC settlement talks are happening and moving along, there most likely won't be any conclusion for weeks or months, according to the Wall Street Journal.
A Nasdaq spokesperson declined to comment on the possible settlement.