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Facebook investors have been offered $40 million by the NASDAQ stock exchange for a computer hitch that stopped them trading on debut day.
Some shareholders had hoped to sell the much-hyped shares on the issue day to take advantage of pent-up buyer demand.
But technical problems kept many investors from buying shares in the morning or selling them later in the day.
The payout is meant to reimburse those who lost money because of the fault.
The opening of trading was delayed by half an hour and some investors were unable to tell whether their orders were processed, while others said they were left holding shares they did not want.
Facebook investors have been offered $40 million by the NASDAQ stock exchange for a computer hitch that stopped them trading on debut day
Facebook’s shares went on sale at $38 a share on 18 May, but rose sharply in early trading, something many buyers had hoped to capitalize on by selling during the day.
They ended the day barely above the starting level though, and have floundered since, falling to around $25 a share.
NASDAQ says it will reimburse those who tried to sell into the first-day bounce at $42 or less, but either couldn’t sell or sold at a lower price than they intended.
The $40 million is more than 10 times the $3 million previously paid by NASDAQ for technical errors, but already there have been complaints from some investors it will not be enough to cover losses.
NASDAQ’s chief rival, the New York Stock Exchange, has accused NASDAQ of giving itself an unfair advantage, saying the move gives investors an incentive to move more of their trading to NASDAQ.
In a statement it said: “This is tantamount to forcing the industry to subsidize NASDAQ’s mis-step and would establish a harmful precedent that could have far-reaching implications for the markets, investors and the public interest.”
The exchange added it would “strongly press our views” against the proposal, which has to be approved by the watchdog the Securities and Exchange Commission.
Facebook shares have fallen below $29 for the first time since their flotation to a new low.
The shares were launched at $38 less than two weeks ago during its high-profile flotation, which valued the firm at $104 billion.
Since then, Facebook’s shares have lost almost a quarter of their value.
Russia’s biggest social network, VKontakte, has now postponed its stock market launch, fearing a repeat of Facebook’s problems.
“The IPO of FB [Facebook] destroyed the faith of many private investors in social networks,” said chief executive Pavel Durov in a message posted on Twitter.
Facebook shares fell more than 9% to a low of $28.78.
Facebook shares have fallen below $29 for the first time since their flotation to a new low
One reason for the fall in shares since its initial public offering (IPO) is that Tuesday was the first day that options on Facebook stock began trading.
Options are a form of derivative, that allow bets on the future direction of the stock. It appears that most investors are betting Facebook shares will head lower.
The situation is a remarkable turnaround from recent weeks, when the eight-year-old firm’s share sale was over-subscribed.
The social networking site has transformed the way in which hundreds of millions of people around the world communicate. It is also transforming the way companies advertise to existing and potential customers.
But Facebook’s 900 million users helped the company generate just $1billion in profit last year, and there are concerns about its ability to increase profits in the future.
The flotation was disrupted on its first day of trading by technical glitches on the NASDAQ stock exchange. The share price has since slumped amid worries that the company was over-valued by advisers marketing the float.
Now, a group of investors has issued a class-action lawsuit alleging that Facebook revenues were revised down because of a surge in the number of people using mobile devices for apps and connection to websites.
The suit targets Facebook, its founder Mark Zuckerberg and the banks behind the flotation, including lead underwriter Morgan Stanley.
The share sale in New York raised $16 billion for Facebook.
Recent reports suggested that Facebook is to launch its own smartphone by next year.
New reports have suggested that Facebook is to launch its own smartphone by next year.
The New York Times cited unnamed sources, including Facebook employees, suggesting that the network had been hiring several smartphone engineers.
Facebook recently admitted it was struggling to make money out of its growing mobile audience.
The company, which recently floated on the stock market, has also just launched its own mobile app store.
New reports have suggested that Facebook is to launch its own smartphone by next year
The App Center currently offers links to Facebook-enabled apps within Apple’s iOS and Google Android stores but developers will soon be able to write apps to be placed exclusively in Facebook’s store.
According to the New York Times, Facebook has hired experts who worked on the iPhone and other smartphones.
It quoted a Facebook employee as saying the site’s founder Mark Zuckerberg was “worried that if he doesn’t create a mobile phone in the near future… Facebook will simply become an app on other mobile platforms”.
A Facebook smartphone has reportedly been in the works for some time.
In 2010, Techcrunch reported that Facebook was “secretly” building a smartphone – although this particular project is said to have broken down.
The company’s desire to enter the smartphone market could be a result of increasing pressure to improve the potential of mobile to make money.
In a statement for potential investors ahead of its initial public offering earlier this month, the company admitted it had concerns about more users accessing Facebook through their mobile – a trend which could make it more difficult to sell advertising.
A spokeswoman for Facebook said the company did not comment on speculation, and referred instead to a written statement.
“Our mobile strategy is simple: we think every mobile device is better if it is deeply social,” the statement read.
“We’re working across the entire mobile industry; with operators, hardware manufacturers, OS providers, and application developers to bring powerful social experiences to more people around the world.”
Two masked men have paid a visit to a house in south-eastern Australia, hours after a teenage girl posted a photo on Facebook of a large sum of cash.
The robbers, armed with a knife and a club, struck the home of the 17-year-old girl’s mother in the country town of Bundanoon on Thursday, police say.
Her mother told the men her daughter no longer lived there.
Two masked men have paid a visit to a house in south-eastern Australia, hours after a teenage girl posted a photo on Facebook of a large sum of cash
It is not clear how the robbers found the family address. The Facebook image was at the grandmother’s Sydney house.
The men searched the house and took a small amount of cash and a small number of personal objects before leaving.
No-one was injured.
The girl had earlier posted a picture on her Facebook page of a “large sum of cash” she had helped count at her 72-year-old grandmother’s home in Sydney, 120 km (75 miles) north-east of Bundanoon.
Following the incident, police have issued a warning over the dangers of posting sensitive information online.
Facebook has launched a new photo sharing smartphone app called Camera.
The software allows users to take multiple pictures and share them at once rather than having to upload them one at a time.
Camera also features a feed of friends’ photos.
The launch is unexpected as the program offers users similar tools to Instagram which the social network is in the process of taking over.
Both apps allow users to add filters and make other tweaks to photographs.
Facebook’s Camera photo sharing app offers users similar tools to Instagram which the social network is in the process of taking over
Facebook has agreed to pay $1 billion for Instagram, but the acquisition has not been completed.
Brian Blau, research director at the technology analysts Gartner, said the move may surprise some, but thought it made sense.
“Facebook has to move its business forward,” he said.
“It said earlier that it would keep Instagram as a separate business, but you need to bear in mind that it is buying a unique social network with a specific demographic.
“By doing this Facebook allows Instagram to remain intact while adopting some of its features to ensure its core service maintains its lead as the internet’s most used photo sharing site.”
At present Camera only works on Apple’s smartphones and tablets.
A news release from Facebook did not mention when it might be released for Android or other systems.
Amid a flurry of lawsuits over Facebook’s IPO, Morgan Stanley, the company’s top underwriter, says it’s prepared to pay back investors who were burned when they bought shares.
Morgan Stanley announced in a memo on Wednesday that it is reviewing Facebook trades and would adjust prices for some retail customers who overpaid.
The IPO mishaps have sparked numerous lawsuits against Morgan Stanley, the NASDAQ stock exchange and Facebook itself by shareholders who claimed they hid the social networking company’s weakened growth forecasts just before it went public.
The allegations raised questions about whether top investors profited at the expense of smaller buyers.
Meanwhile, Facebook is in talks with the New York Stock Exchange to move its stock from the NASDAQ Stock Market after the botched IPO on Friday, according to a person familiar with the matter.
The person spoke on the condition of anonymity because they were not authorized to speak publicly.
Facebook’s much-anticipated IPO was delayed by a half-hour on Friday because of technical glitches on the NASDAQ.
Morgan Stanley announced in a memo on Wednesday that it is reviewing Facebook trades and would adjust prices for some retail customers who overpaid
After pricing at $38, Facebook’s stock closed up 23 cents on Friday and has been down since. On Wednesday, it closed up $1, at $32, still down nearly 16% from the IPO price.
NYSE declined to comment.
The news comes as even Facebook CEO Mark Zuckerberg dumped his own shares in the company, making $1.13 billion as the stock nosedived, according to company filings.
On Wednesday, shareholders filed a lawsuit against Facebook and the banks behind the company’s stock, Morgan Stanley and Goldman Sachs.
Additionally, both the Securities and Exchange Commission and the Financial Industry Regulatory Authority have begun looking into the matter.
The U.S. Senate Banking Committee has also launched an inquiry and the state of Massachusetts has subpenaed Morgan Stanley, demanding answers.
The House Financial Services Committee said that it was also gathering information for their own review.
Facebook stock rose 3.3% in trading on Wednesday, rising to $32 a share.
However, a new analysis said the stock could fall to as low as $9.59.
That’s a far cry from the $37.58 that Zuckerberg fetched for 30.2 million shares he unloaded on Friday.
By the end of trading on Tuesday however the price had dropped to $31 meaning Zuckerberg saved himself a cool $174 million by getting out early.
Mark Zuckerberg, 28, still holds a vast amount of Facebook stock but his decision to sell off so much will leave investors wondering about his confidence in the company.
The drop is based around the realization that Facebook might not be growing as quickly as initially thought. And the company’s second-quarter growth will likely fall short of expectations as fewer new users join the social networking giant.
Shareholders filed a lawsuit on Wednesday, alleging that Mark Zuckerberg, Facebook and the banks that backed the Initial Public Offering, Morgan Stanley and Goldman Sachs, knew this information, but weren’t forthcoming with it.
On Tuesday, Reuters revealed that the banks’ analysts downgraded their estimates about the future earnings of the company while they were rolling out the IPO.
Business Insider called the move “unprecedented”.
Furthermore, the website reported that the banks revealed to privileged major investors that the share price was likely to tank, but left smaller stock buyers in the dark about this information.
The Securities and Exchange commission is investigating these allegations and the state of Massachusetts has filed a subpoena demanding Morgan Stanley release information about the IPO.
Facebook’s flotation has run into more controversy amid reports of concerns about the way advisers disclosed information to investors.
As Facebook shares fell another 9% on Tuesday, regulators said they may review the disclosure process to see if some investors got favorable access.
The SEC and regulatory body FINRA both said they would look into the matter.
Morgan Stanley, lead underwriter on the flotation, said it was “in compliance with all applicable regulations”.
Reuters and the Wall Street Journal reported that Facebook’s advisers may have revised their financial forecasts for the social networking company, but that only selected investors were told.
Facebook's flotation has run into more controversy amid reports of concerns about the way advisers disclosed information to investors
Mary Schapiro, chairman of the Securities and Exchange Commission, said “there are issues that we need to look at”.
Richard Ketchum, chief executive of the Financial Industry Regulatory Authority (FINRA), said there were “matters of regulatory concern”.
But in a statement, Morgan Stanley spokesman, Pen Pendleton, said the bank had “followed the same procedures for the Facebook offering that it follows for all initial public offerings”.
Also on Tuesday, a private investor issued a writ against the NASDAQ stock exchange over technical problems on Friday that disrupted Facebook’s first trading day.
Phillip Goldberg, a Maryland resident, is seeking class-action status on behalf of all investors who say they lost money because of the technical problems.
Facebook’s market debut was delayed by about half an hour, and orders to buy or sell shares were further disrupted. Philip Goldberg has filed a writ in the southern district court of New York.
NASDAQ chief executive Robert Greifeld has said that “clearly we had mistakes in the Facebook listing”.
It has all taken the shine off one of the most anticipated flotation in history.
Facebook shares, launched at $38 each on Friday, fell 11% on Monday and a further 9% on Tuesday. The shares are now worth $31 each.
It is a remarkable turnaround from recent weeks, when the social network’s share sale was over-subscribed and the eight-year-old firm was valued at $104 billion.
Much of the blame for the fall in share price is being pinned on lead underwriters Morgan Stanley and the NASDAQ exchange itself, with many commentators saying that the sale was over-priced.
“There must have been some sober second thoughts about this,” said Brian Wieser, an analyst at Pivotal Research.
Brian Wieser thinks a fair price for such a young company without a proven business model is about $30.
But some analysts say the fall is of little consequence in the early days.
“Whether [Facebook] is worth $95 billion or $100 billion, it’s immaterial,” Jeremy Liew of investment company Lightspeed Venture Partners told Reuters.
The social networking site has transformed the way in which hundreds of millions of people around the world communicate. It is also transforming the way companies advertise to existing and potential customers.
But Facebook’s 900 million users helped the company generate just $1 billion in profit last year, and there are concerns about its ability to grow profits in the future.
Facebook shares have fallen in early trading on Wall Street to below the price at which they were floated.
Despite the wider market in buoyant mood, Facebook slid 12% immediately at the opening bell and were still 11% down at $33.92 more than one hour into the trading day.
Facebook’s flotation on Friday at $38 a share was delayed by technical problems on the NASDAQ stock exchange.
NASDAQ boss Robert Greifeld said he was “humbly embarrassed” by the glitch.
Facebook shares have fallen in early trading on Wall Street to below the price at which they were floated
Trading was delayed by 30 minutes due to late order cancellations, and the shares closed on Friday at $38.23, having hit $45 earlier in the day.
The offer price valued the site at $104 billion.
Analysts said Facebook shares were the most frequently traded on Wall Street, but sentiment had changed since Friday.
“One of the things that we are seeing in Facebook is a lot of emotional trading, in that over the weekend much of the media coverage was negative, and that could be weighing on investors’ decisions to get out of the stock,” said JJ Kinahan from stockbrokers TD Ameritrade.
“This was not our finest hour,” said Robert Greifeld.
As a result of the glitch, a number of investors were unsure whether their buy and sell orders had actually gone through.
However, Robert Greifeld said that once the glitch had been fixed, trading had been “successful”.
More than 566 million shares in the company changed hands, a record volume for US market debuts.
Some analysts suggested the share price would have fallen on Friday had it not been for underwriters stepping in to buy up stock.
Strong demand in the run-up to the flotation had led the company to increase both the price and the number of shares available for sale.
Other internet companies have had mixed experiences recently when they have started selling shares.
Online games maker Zynga’s shares fell 5% on their first day of trading in December 2011. However, shares in business networking site LinkedIn more than doubled on their debut in May last year, while Groupon shares jumped 30% on their debut in November.
Some less-than-enthused analysts are already warning their clients against buying Facebook’s shares one day after the social networking site rolled out its much-anticipated IPO.
Brian Wieser, an analyst at Pivotal Research Group in New York, said that Facebook’s shares were implausibly priced, leading him to put a “sell” rating on the stock.
Facebook’s less-than-stellar debut saw its shares end the day on Friday just 23 cents, or 0.6%, higher than its initial price, at $38.23, valuing the company at $104.2 billion – even though it only made $3.7 billion last year.
The shares opened up 11% at a respectable price of $42.05 in the morning, and jumped as high as $45 at one point, only to fizzle out after initial technical difficulties delayed the start of the trading by about two hours.
Facebook’s less-than-stellar debut saw its shares end the day on Friday just 23 cents, or 0.6 percent, higher than its initial price, at $38.23, valuing the company at $104.2 billion
“While we like the company, we’re troubled by investors’ perception of the risks,” Brian Weiser told the Sunday Telegraph.
“It’s priced for perfection and that’s clearly implausible.”
Company filings after the market closed on Friday night revealed the extent to which the banks who underwrote Facebook’s massive $6 billion IPO were forced to move in and prop up Facebook’s shares to prevent them from nosediving below $38, the New York Post reported.
Morgan Stanley, Facebook’s lead financial adviser, ended the day with 162 million Facebook shares worth $6.16 billion. Other banks, including JP Morgan and Goldman Sachs, ended the day with $3.2 billion and $2.4 billion holdings, respectively.
According to Wall Street experts, without the “bank bailout”, Facebook’s IPO would have been a dud on Friday.
The heavy buying, however, decreased the banks’ already small fees on the deal: the underwriters agreed to accept just 1.1% of the $16 billion Facebook raised in the IPO.
After splitting $176 million in fees, the firms likely spent around $380 million on the shares, wiping out their already-meager profits.
Doing a post-mortem of the disappointing IPO roll-out, many experts put the blame on the bankers for setting the price too high.
The banks were apparently wary of pricing the shares too low, aiming for a modest first-day gain of anywhere between 5% and 10%, which failed to materialize.
Facebook had increased the number of shares being sold in the IPO by 25%, to 425million, with most of the additional float coming from early investors looking to cash out – a move that had raised a red flag among analysts.
It remains to be seen what the future holds for Facebook. The social media giant will be forced to balance the need to feature more advertisements on the site with the risk of alienating its 900 million users, whose loyalty is integral to Facebook’s success.
The fact that Facebook will have to make further acquisitions, and has a still unproven advertising model, are two of the reasons why Pivotal argues Facebook stock should have been priced no higher than $30.
“None of this is to take away from the fantastic success of the company,” said Brian Wieser.
“It’s just not consistent with the economics.”
When trading resumes at New York’s NASDAQ exchange on Monday morning, investors will be watching closely to see how Facebook shares perform in the heels of the lackluster first day.
Meanwhile, the Securities and Exchange Commission, the financial regulator, has said it will review the technical glitches that marred the roll-out of the IPO to determine the cause of the delay.
The NASDAQ exchange saw Facebook shares jumping more than 10% within minutes of making their stock market debut.
Facebook shares rose to $42, having been initially priced at $38 each, before falling back to trade flat.
Mark Zuckerberg, 28, who started Facebook while at university, remotely opened trading on the Nasdaq earlier.
He appeared via a video link from a celebration at the firm’s headquarters in California.
There had been a delay of about half an hour in the start of trading in Facebook shares, which analysts say reflected the huge demand for the stock.
The $38 initial share price values the eight-year-old social network site at $104 billion.
Strong demand had led the company to increase both the price and the number of shares available for sale.
Facebook’s owners are releasing just under a fifth of the company’s total shares, about 421 million, which could raise about $18 billion.
The site is largely used for social updates, and although Facebook has said its use on mobile devices are the key to new profits, analysts question how much room there is for advertising on such platforms.
The NASDAQ exchange saw Facebook shares jumping more than 10 percent within minutes of making their stock market debut
Car giant General Motors added to those doubts by saying on Tuesday that it would no longer pay to advertise on the site.
Online strategy consultant Atul Chitnis said the question was whether Facebook had a strategy to bring advertisers in.
“My belief is that Facebook does have a strategy, they are ready with something they have not yet talked about,” he said.
“How effective it is we will have to watch and see.”
He also said he expected to see a “brief burst” of the share price going up and then “sinking again” in a couple of days.
Facebook’s valuation means the social network site is worth about the same as internet shopping giant Amazon, and more than the value of stalwarts such as Disney.
The initial public offering (IPO) of the shares is the third-largest in US history, after the financial giant Visa and General Motors.
Facebook employees had been up all night ahead of the event, taking part in a “hackathon” at the company’s headquarters in Menlo Park, California.
It is an event in which programmers work on projects and come up with new ideas.
Facebook’s profits are tiny in relation to its size – it makes about $5 a year for each of its 900 million users – and its plans to increase profitability are unclear.
Oliver Pursche, president of Gary Goldberg Financial Services, said ahead of the flotation: “We’re telling our investors to hold off.
“Number one, we don’t know what the guts and the balance sheet of the company looks like yet so that’s a big red flag for us. We want to understand the business before we tell people to invest.”
Facebook also faces concerns over privacy.
Indeed, on Friday a class action suit was brought against the company in the US for “improperly tracking the internet use of its members even after they logged out of their accounts”.
Facebook itself has previously warned about the possible impact of evolving legal protections across the world on consumer privacy, and specifically a revision to the European Union’s privacy laws.
Other internet companies have had mixed experiences when they have started selling shares.
Online games maker Zynga’s shares fell 5% on their first day of trading in December 2011.
But shares in business networking site LinkedIn more than doubled on their debut in May last year and are still trading well above that level, while Groupon shares jumped 30% on their debut in November.
However, they have since fallen back, particularly after the daily deals firm admitted in April that it had overstated its previous revenues and earnings.
Facebook’s flotation had an immediate impact on the value of these companies, as their share prices fell at the same time as Facebook’s fell back from its initial spike.
Groupon dropped 5.6%, LinkedIn fell 1.2%, while shares in Zynga were suspended after plunging more than 13% in a matter of minutes.
The new Facebook shareholders will not have much say in how the business is run.
The shares on offer are “A” shares, which carry one vote per share, as is normal, but the current owners’ shares are “B” shares, which carry 10 votes each.
They will control more than 96% of the votes after the flotation, with founder Mark Zuckerberg holding just under 56% of the voting power of the company.
Mark Zuckerberg, who owns about 25% of the company, stands to gain the most from taking Facebook public. Fellow founders Dustin Moskovitz and Eduardo Saverin will also become paper-billionaires overnight, as will Napster founder and former employee Sean Parker.
US venture capital firm Accel Partners and Russian internet investment group Digital Sky Technologies also hold significant stakes in Facebook, while software giant Microsoft and U2 frontman Bono also stand to make a huge profit on their investment in the company.
Facebook is now testing a system that allows users pay to highlight or promote posts.
By paying a small fee Facebook users can ensure that information they post on the social network is more visible to friends, family and colleagues.
The tests are being carried out among the social network’s users in New Zealand.
Facebook said the goal was to see if users were interested in paying to flag up their information.
Facebook is now testing a system that allows users pay to highlight or promote posts
The tests of the “pay to promote” system were discovered by a Facebook user in Whangarei, reported New Zealand’s news magazine Stuff.
At first, said Stuff, the user thought the offer to pay to promote a post was a con trick.
A Facebook spokesperson confirmed the offer was genuine.
“We’re constantly testing new features across the site,” said the spokesperson.
“This particular test is simply to gauge people’s interest in this method of sharing with their friends.”
Different methods of highlighting posts were being tested, said the spokesperson. These would see a range of charges being levied to make posts more visible. Comments on the tests suggest the highest price being charged was $2 while others cost 40c or 80c.
Payments could be made via credit card or PayPal.
The spokesperson said some of the methods it was trying out would incur a charge but others would highlight a post for free. The spokesperson would not be drawn on when the test would end or if it would be tried in other territories.
“We’re going to see a lot more ideas like this where they are testing out different ways to try to make money,” said Ian Maude, internet analyst at Enders Analysis.
Both Facebook’s imminent stock market flotation and a recent slowdown in revenue growth were helping to concentrate its attention on ways to make money, he said.
“In the last few years their overall revenue has grown much more quickly than their audience,” he said. However, he said, that rapid growth had slowed in the last six months and had perhaps prompted it to experiment.
The flotation will add more pressure, said Ian Maude but he added that the way the stock would be split could lighten that burden a little as Mark Zuckerberg would be left 57% of the shares.
“He’s always said he wants to make money to run the company not run the company to make money,” said Ian Maude.
Facebook launches its own app store to promote mobile programs that operate using the social network.
Facebook said the App Center will become the “new, central place to find great apps like Draw Something” and other titles.
Developers will have the ability to charge a fee for apps sold in the store in the near future, Facebook said.
The announcement came as Facebook admitted growth in mobile use could hurt future advertising revenue.
Ahead of its initial public offering, Facebook told potential investors in a statement: “If users increasingly access Facebook mobile products as a substitute for access through personal computers, and if we are unable to successfully implement monetization strategies for our mobile users, or if we incur excessive expenses in this effort, our financial performance and ability to grow revenue would be negatively affected.”
Facebook launches its own app store to promote mobile programs that operate using the social network
The App Center is expected to be rolled out globally in “the coming weeks”, said Facebook’s Aaron Brady in a post on the network’s developer blog.
“All developers should start preparing today to make sure their app is included for the launch,” he wrote.
However, Aaron Brady said the store was not designed to compete head-on with the likes of Apple’s App Store and Google Play.
“The App Center is designed to grow mobile apps that use Facebook – whether they’re on iOS, Android or the mobile web,” he wrote.
“From the mobile App Center, users can browse apps that are compatible with their device, and if a mobile app requires installation, they will be sent to download the app from the App Store or Google Play.”
Only apps which make use of Facebook’s log-in system Connect are eligible to be included in the store.
Saverio Romeo, an industry analyst from Frost & Sullivan, said the store announcement suggested an aggressive push by Facebook to become a bigger player in mobile.
He said Facebook needed to become “more significant, to attract more ideas and get more experience in the mobile space”.
“I think the store is an important element – a community of developers is a fundamental element in the growth we have seen with Apple and Android,” Saverio Romeo said.
He also said he believed Facebook could position itself as the first major app store to be platform-agnostic – that is, not tied to a single platform such as iOS or Android.
“The type of applications that the Facebook community can develop can have an incredible open horizon.
“Facebook is ubiquitous – it does not have any preferential routes. The question is the monetisation of all this.”
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