The Facebook IPO debacle points to two issues that will be discussed for some time to come. Yes, there will be finger pointing for someone or something to blame for the botched outcome. But once the lawsuits are launched and ultimately litigated, the larger question is how should IPOs be handled and the relevance of the exchanges themselves. The number of IPOs has declined in recent years and the number of companies listed on U.S. stock exchanges had dropped over the last 10 years. More and more small companies have sought the attractions of private equity and many major U.S. institutional investors have been turning to so-called “grey markets,” such as SecondMarket, which offers many of the advantage of stock markets at a lower cost and fewer regulatory burdens.
Nasdaq realizes that it blew the offering. According to reports in The Wall Street Journal, investors and financial firms say they lost a collective $500 million on Facebook shares that they tried to unload but were unable to sell as the company’s stock price began falling shortly after the IPO. Worse, Nasdaq CEO Bob Greifeld had marooned for almost five hours on a business class flight to Newark with a phone he says didn’t work. Apparently, he didn’t realize that continuing breakdowns at his exchange had left countless investors not knowing how many Facebook shares they had bought or sold and at what price. Nor did he know that SEC chief Mary Schapiro was desperately trying to reach him. So, in the launch of one of the key technology companies of the 21st century, technology failed the exchanges CEO.
The ultimate question is whether new technology has superseded the exchanges that have until now served as a central source of liquidity for capital markets.
Read: Nasdaq CEO Lost Touch Amid Facebook Chaos
Read: Nasdaq faces years of litigation, ire over botched Facebook IPO
Read: NASDAQ CEO Bob Greifeld was MIA for Five Hours During The Facebook IPO Disaster
Read: Nasdaq CEO’s Facebook Damage Control Undone by Lack of In-Flight Wi-Fi