Nasdaq Payout In Facebook IPO $62 Million Cash

Nasdaq OMX Group Inc., the second- biggest U.S. stock exchange owner, revamped its proposal to compensate brokers that lost money in the public debut of Facebook Inc. (FB), boosting the payout to $62 million cash.
The amendment, which follows criticism from Wall Street market makers and exchanges about the original plan, increases the compensation pool from $40 million and does away with a proposal to credit most of the money through reduced trading costs, according to a submission with the Securities and Exchange Commission. Member brokers who accommodated customers for losses will get paid first, it said.
“It’s an attempt by Nasdaq to show that they recognize that their clients are very unhappy,” Larry Harris, a professor of finance and business economics at the University of Southern California in Los Angeles and a former chief economist at the SEC, said in a phone interview. “Clearly, making it all-cash is more palatable for regulators and for competitors.”
Delays and malfunctions on the Nasdaq Stock Market were the first signs of trouble in the May 18 Facebook initial public offering that burned investors, spurred losses on Wall Street and prompted lawsuits against the company, its exchange and the underwriters. At yesterday’s close of $28.76, the stock remains down 24 percent from the price set by underwriters, although it has recovered from its low of $25.87 in June.
‘Deeply Regret’
“We deeply regret the problems encountered during the initial public offering of Facebook,” Nasdaq OMX Chief Executive Officer Robert Greifeld said in a press release yesterday. “We failed to meet our own high standards based on our long history of providing outstanding technology to our members and exchange customers. We have learned from this experience and we will continue to improve our trading platforms.”
In May, Greifeld acknowledged “poor design” in software put the opening auction that set the price for the first traded shares into a loop that delayed its completion.
The exchange operator is submitting its updated payment accommodation plan to the SEC in a filing dated July 23. The public will be able to comment and the SEC must approve it before implementation. Nasdaq OMX said yesterday it expects all compensation will be provided within six months.
Read more: bloomberg.com

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