– UBS May Have Facebook Trading Loss of $350 Million (Yahoo Finance/CNBC, June 8, 2012):
UBS is sitting on losses that could be as high as $350 million stemming from its investment in the Facebook initial public offering, and is preparing legal action against Nasdaq as a result, people familiar with the matter told CNBC.
That loss is some ten-times more than the $30 million number that is currently being speculated in the market by others.
The issue has to do with the failure to get confirmations and executions from the Facebook trade.
These people said UBS wanted 1 million shares, but when it did not receive confirmations, it repeated the order multiple times and was left with much more than it intended.
“Given the size of our U.S. equity business and our role as a major market maker, UBS was affected by these issues, as we believe other market participants may have been,” UBS said in a written statement.
“Consistent with our policy on market comments on our positions or intra-quarter performance, we are not disclosing the amount of the loss, which is not material to UBS,” it continued. “We are continuing to consider avenues to recover our losses in this matter, but have not yet taken legal action.”
There have been reports in the market that UBS’s market-making arm is down $30 million to $35 million, but UBS itself has not disclosed the full extent of its losses related to Facebook.
Sources told CNBC, UBS is preparing a lawsuit against Nasdaq. Whether Nasdaq will be liable for such a loss is debatable. It is important to remember that UBS was selling much of the excess stock it received.
At the end of the day, these sources said, Nasdaq should have halted the stock when it was clear that the confirmations were not coming out. Apparently, UBS tried to unload the stock at $35 a share, but could not catch a bid and sold some of the positions under $30 a share. As Facebook shares were dropping, UBS was a big seller, according to these people.
It is not clear whether UBS has hedged this loss in anyway.
UBS was not part of the deal to take Facebook public, and Nasdaq is having discussions with all of the major banks and wholesalers to understand where the liability lies.
However, many have criticized the deal as being mispriced and too big, and said the system overwhelmed.