But for the first two hours of regular trading, nothing happened to the share price. “Unchanged,” read the screens on Nasdaq’s exchange and on cable channels that had prepared special segments. When trading finally began at 11:30, applause broke out at Facebook’s headquarters in Menlo Park, Calif.
The stock shot up.
Then chaos ensued.
Traders couldn’t get basic information such as the stock price or even whether their requests for shares were going through Nasdaq’s systems, industry officials with knowledge of the matter said. The stock gyrated wildly. Some investors ran for the exits, selling off or canceling what they had ordered, said the officials, who spoke on the condition of anonymity because they were not authorized to talk about the events.
Facebook tumbled and hit its offering price of $38.
The shares almost certainly would have gone lower, but the banks that put the deal together stepped in to prop up the share price. That may have saved Facebook, the banks and Nasdaq from an embarrassing loss on the first day of trading. The practice is legal, but unusual for such a celebrated stock offering.
Throughout the day, the banks — which included Morgan Stanley, JPMorgan Chase and Goldman Sachs — had to bail out the stock several times, the people familiar with the matter said.
By the close of regular trading, the stock had barely scraped out a gain of 23 cents. To top it off, the Securities and Exchange Commission said it would review the incident with Nasdaq to determine what caused the trading glitches.
Facebook declined to comment on the stock trading. Experts noted that the company was still able to raise a massive amount of money through the stock sale. And analysts said the day’s events were hardly a failure for the social networking company.
Rather, the letdown was on Wall Street.
Industry officials said that most involved in the deal had expected about a 5 to 10 percent gain. In interviews, they pointed the finger of blame at Nasdaq.
“It was just chaos this morning, and that put a bad sentiment on the entire day,” said one official, speaking on the condition of anonymity. “It’s certainly egg on [Nasdaq’s] face. This was the offering of the year and you needed to have your systems in order.”