FB Stock Confusion From NASDAQ rule 4626 form Could Have Caused Selling

FB Stock NASDAQ Rule 4626

Did Facebook’s IPO get tainted with buying and selling that shouldn’t have happened? It sounds like a number of things went wrong in Wallstreet as stock traders, hedge fund managers and people betting on FB stock possibly got burned.

A hedge fund manager was so upset with the situation he revealed to Business Insider some of the issues he’s been running into. It was asked that the manager’s name be kept anonymous because he said, “I have a mortgage” and “I’m a blue collar Wall Street guy…I could lose my job if my partners found out I was talking to you.”

The first problem it seems that NASDAQ had was on opening day of the Facebook IPO. The system was somehow broken in that it was not delivering confirmed trades on buy and sells of the FB stock. While the weekend left traders scratching their heads wondering if their stock had actually sold or been purchased they got a surprise Monday morning.

In order to clear up the confusion NASDAQ started calling stock brokers about the Facebook stock issues. From the interview with the anonymous hedge fund manager with Business Insider it was said, “NASDAQ has a rule that says this is how we handle computer f–kups. NASDAQ rule 4626. It says if we f–kup we’ll pay it. They have a kitty of $3 million that they’ll payout.”

How was one supposed to get a piece of this $3 million backup fund in case NASDAQ had a computer problem? A form. The form caused the confusion that has apparently created lots of selling on Monday of Facebook stock. There was a 12:00pm lunch time deadline for the form to be filled out and submitted to NASDAQ in order to get money from their computer error fund.

The form applies to the NASDAQ rule 4626 and was pretty short and sweet. The form simply asked a trader how much they tried to sell NASDAQ:FB at and what they actually sold NASDAQ:FB at. Both parts of the form had to be filled out so traders took the que that in order to submit the form they need to sell the Facebook stock they were holding.

This apparently caused a rash of selling of Facebook stock and created downward pressure on the price which in turn caused more selling. NASDAQ isn’t answering press attempts to comment on the way the whole Facebook stock mess went down. It will probably be a few days before everyone knows whether NASDAQ will try and fix this or if stock traders get burned with major losses.

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17 Comments on "FB Stock Confusion From NASDAQ rule 4626 form Could Have Caused Selling"

  1. FB stock sunk bc of several reasons, the first being they diluted the stock, second being they over valued the company at 100 billion, and the third being they dont have much of a business model, , its a black box company that sells peoples vacation photos. Forth being the banks have shorted the stock from day 1. They essentially raised the stock price while increasing the shares and the market doesn’t work that way, I foresee this stock falling to around 10/share, once the speculation is cleared up.

  2. didn”t mommy ever tell you dummies that the stock market is just like gambling in a casino .>> win 10% of the time but lose 88% and break even 2% which means its a losing battle period

    • If I could rate your response to -5 for ignorance about the stock market works I would.

    • Tony, the stock market is not a casino. Its impossible to never loose money, the worlds greatest investors have lost money in the stock market AND will loose money again in the future. Before you buy a stock, research the fundamentals and realize how much who are paying for it. Then calculate the risk and reward.

  3. FB needs to fall below 30 to 29 IMO. and what it shold have been in the first place

  4. Howie Feltersnatch | May 23, 2012 at 9:17 am | Reply

    Shenanigans. No way is Rule 4626 or anything other than the market reaction to an ill conceived IPO that is sending FB into the dumpster. $3 million is nothing in a 2 Billion share/$100 Billion offering. No one is going to sell at a loss to maybe get a tiny piece of that $3 million insurance. If FB had any real value then a single position alone would equal that $3 million. It would cover less an hour of regular trading activity of a regular day if that much. When it became apparent that retail investors were warned off by principals dumping and running and the horrible fundamentals it became only the underwriters making trades to support any value to the stock whatsoever. From today on you are likely to see shorts buying to cover their positions, but FB is in for quite a slide.

  5. LinkedIN EPS is 15 cents it opened at 45 now around 100. Facebook EPS 31 cents opened around 38-42. It will double maybe more in a couple of month’s. All this Neg. does not mean a thing. I am surrounded by peolple that did not like facebook and are now BUYING. Don’t buy if you can’t stomach this bad press that has nothing to do will value.

  6. Jorslinger & Associates | May 23, 2012 at 6:47 am | Reply

    Only a fool would have bought any stock in facebook during the IPO. It’s stock was valued at over 100 times it’s “projected” earnings. That stock is not woth more than $5 a share in my opinion. Those with preferred stock made a bundle selling it to people caught up in the hype of the moment. I see facebook falling to $22 by this weekend.

  7. What happens when the $3mm runs out? I can’t help thinking the losses in that period will far exceed that amount.

  8. You people are morons. ALL of you idiots bought this stock WAY overpriced and expected it to go to the MOON!

    It’s not 1999 anymore, the tech bubble is dead.

    I mean, come on, LOOK AT THE FINANCIALS! So much for your quick buck.

  9. Wilson Chen | May 23, 2012 at 1:40 am | Reply

    EAT IT LOSERS!!! By back your stock? By back my b@lls! That’s what happens when you play the stock market like an idiot.

  10. facebook needs to buy back their stock at the price it was sold to the little guys…that’s the only fair thing to do.

    • I completely agree with JC. It’s understood that Nasdaq f’d up, but this mess should be cleaned up the right way. In this market, these types of losses should not be taken lightly and if FB executives decided at the last minute to increase the shares offered which has also affected the price, then they should also take the responsibility of their F’up and buy back their shares at the price. Many of us have been burned by this and an 11% decrease on day 2 followed by a 9% decrease on day 3 is hard to ignore, especially when its your kids college savings funds that are now in jeopardy.

    • beaverusiv | May 23, 2012 at 3:03 am |

      Haha, whatever. If they have faith in the stock then let them ride it out, if they don’t then they’re idiots for buying. People make money when other people lose money.

    • Yeah, that’s not gonna happen.

    • Mike Jacobs | May 23, 2012 at 6:22 am |

      Why would Facebook pay for NASDAQ’s screw-up? They’re a victim here too; their stock is tumbling in part because the exchange fumbled the IPO, combined with Morgan Stanley’s revenue estimate downgrade which is now being investigated.

    • I am confused by your concept of fair. Buying a stock is an economic decision in which the value will either go up or go down. Just because someone is stupid enough to think that a facebook IPO would be their pathway to instant riches, does not mean that Facebook owes them a cent. The fact that the Facebook IPO tanked is economic Darwinism at its finest.

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